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Kolkata , Aug. 13

ASSETS worth about Rs 7,000 crore involving about 22 companies will be transferred to the newly-constituted Asset Reconstruction Company of India in the current fiscal, according to Mr P.P. Vora, Chairman of Industrial Development Bank of India (IDBI).

Talking to newspersons on the sidelines of the seminar on Banking East organized by the Confederation of Indian Industry, Eastern Region, here on Wednesday, Mr Vora said IDBI together with ICICI Bank and State Bank of India, the major shareholders of ASRCI, would transfer about Rs 4,000 crore involving 11 companies during the current financial year and the other banks the remaining amount. The share of IDBI alone would be Rs 2,000 crore, he said.

There would be two sets of valuation of assets and, depending on the valuation, security receipts would be issued. The value of the receipts would actually amount to the profits which, however, could not be considered for declaring dividends but only for reduction of the non-performing assets (NPAs).

Earlier while inaugurating the seminar, Mr Vora expressed the view that project financing would continue to be important area of activity for IDBI which was being transformed into a bank. This was because for the past 38 years, IDBI had developed expertise in the field.

He said about 20-25 per cent of organisation's funding would be directed towards term lending of major projects including infrastructure projects, another 20 to 25 per cent to meet the working capital requirement of these projects and the balance for retail activities. "We recently acquired a housing finance company to boost our activity in the field," he observed.

Mr Vora, however, cautioned against risks. Gone were the days when the Government absorbed all the risks of a DFI.

Bond financing and the securitisation of the instruments related to term lending for projects could be considered to avoid probable asset-liability mismatch and to maintain the capital adequacy.

He regretted that the securitisation of mortgage loans for housing finance at $2 billion to $3 billion was insignificant compared with $15 billion to $20 billion in some of the South-East Asian countries.

He also stressed the need for NPA management through corporate debt restructuring mechanism which was a three-tier mechanism. Out of 75 applications involving a total outstanding of Rs 51,000 crore, 44 applications involving Rs 45,000 crore had already been settled, with the borrowers concerned having started repayment of loans as per agreed formula.

These include three steel companies with an outstanding of about Rs 20,000 crore. The management of foreign exchange risk too would be an important component of risk containing in IDBI's future scheme of things, he added.

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