The Hindu : Banks agree for IFCI package

Online edition of India's National Newspaper
Wednesday, Nov 27, 2002

Business

Business

Banks agree for IFCI package

NEW DELHI NOV. 26. In a significant move to reform the two development financial institutions — Industrial Development Bank of India and IFCI — the public sector banks today agreed to come up with a restructuring package for the ailing IFCI while working out a "relationship'' with IDBI to enable it to transform into a universal bank.

A core group comprising top executives of the two FIs along with the Life Insurance Corporation, State Bank of India, Punjab National Bank, Bank of Baroda and Oriental Bank of Commerce, will work out the details of restructuring of principal and interest of the troubled IFCI shortly.

"There is no bailout. But there has to be restructuring of principal and interest of IFCI's debts. The proposal was put forth before the banks. They were examined in details. The mood was very positive,'' the IDBI Chairman, P. P. Vora, said after a meeting with bankers here.

Today's meeting was attended by the chief executives of virtually all public sector banks including SBI, BoB, Central Bank of India, PNB, Corporation Bank, Oriental Bank of Commerce, Punjab and Sind Bank, Indian Bank and Uco Bank.

Mr. Vora said the core group would be meeting next week to chalk out the modalities of the restructuring package for IFCI, which would then be taken up by the respective bank boards for approval.

Both SLR bonds, which qualify for the banks' statutory liquidity ratio, and non-SLR bonds would be restructured, which would assist IFCI to improve its capital adequacy ratio and provide relief in terms of interest costs.

In the case of IDBI, Mr. Vora made it clear that the FI was not asking for any bailout since it had been "constantly'' meeting the debt repayment obligations.

In case of IDBI, Mr. Vora said, "let me make it very clear. We do not require a bailout. We have honoured all our obligations for the last 38 years. We are offering to prepay some of our high cost debts but nobody is approving it.''

"As part of the repositioning of IDBI into a universal bank and working out various modalities such as branch network, and deposit mobilisation, a relationship with commercial banks is being thought of. They have decided to work at this proposal positively,'' he said.

The Cabinet approved the restructuring package of IDBI to enable it to transform into a banking company which would be allowed to accept deposits and carry out only development financing.

For this, the Government intends to repeal the IDBI Act through a Bill in this winter session. The Government also provided a "surety'' of Rs. 2,500 crore for five years to enable the FI to meet the interest differential of its borrowings.

"We will provide both long-term as well as short-term credit to industry. IDBI is in the market to lend to good clients,'' Mr. Vora said. The Deposit Credit Guarantee and Insurance Corporation has submitted a report on IDBI's transformation from a financial institution to a bank that is being considered by the FI.

"We have a capital adequacy ratio of 17 per cent and that will enable us to provide for our non-performing assets and bring it down to below 5 per cent to meet the required norms,'' Mr. Vora said. — PTI

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