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Govt. to repeal IDBI Act, restructure IFCI

NEW DELHI OCT. 22. The Union Government today said the Industrial Development Bank of India would be first corporatised through repeal of IDBI Act in the winter session of Parliament as part of its restructuring while a reform package for the ailing IFCI would be worked out by March 2003.

"The first step will be corporatisation of IDBI through repeal of the IDBI Act. The idea is, once IDBI Act is repealed and it becomes a corporate entity, then we can look at the future," Joint Secretary in the Ministry of Finance, Shekhar Agarwal, told reporters after a meeting of lenders and stakeholders here. Mr. Agarwal also indicated that plans of merging IDBI with a public sector bank or converting the FI into a universal bank would be taken up only after the corporatisation. "We are trying to repeal the IDBI Act by the winter session," he said, adding there was no proposal to bring in an ordinance as of now. He also ruled out a bailout plan for IDBI saying the financial health of the FI was not bad enough to warrant it.

In the first ever meeting of stakeholders and lenders, top officials of Ministry of Finance, Reserve Bank of India, Life Insurance Corporation, State Bank of India, Punjab National Bank, Bank of Baroda and General Insurance Corporation also discussed the restructuring plan of IFCI.

Expressing the Government's concern over IFCI, Mr. Agarwal said "We wanted to talk to lenders and stakeholders and get their perception. We will take everybody's views and work for a proposal for IFCI. May be everybody has to contribute something".

Mr. Agarwal, however, made it clear that bailout was not the proposal that lenders and stakeholders of IFCI discussed today. "Bailout was not discussed today," he said.

Referring to the McKinsey report, he said the management consultant had given estimates of the cash infusion required by IFCI depending on the level of standard assets, non-performing and stressed assets, but the Government was yet to assess the fund requirement. "I don't think anybody can rely on that (McKinsey's) estimate,' Mr. Agarwal said, adding as of now no one was clear of the exact requirement.

He indicated that the stakeholders and lenders would work out a package and provide relief to the beleagured FI. "The IFCI restructuring package will be finalised hopefully by this fiscal or even earlier than that," he said.

IFCI was in the red in the last fiscal even after getting a Rs. 1,000 crore financial assistance from Government and stakeholders.

This fiscal, the FI increased its losses mainly on account of higher provisioning for NPAs, which had eaten into its profitability. The Group of Ministers, headed by the Union Finance Minister, Jaswant Singh, had earlier taken up the restructuring of IDBI and IFCI.

— PTI

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