Financial Daily from THE HINDU group of publications
Tuesday, Sep 03, 2002
Money & Banking - Financial Institutions
IFCI assets may go to lenders
Sarbajeet K. Sen
NEW DELHI, Sept. 2
THE bail-out package for IFCI Ltd is likely to involve a large-scale takeover by other banks and financial institutions of its critical liabilities. The takeover of liabilities would be balanced out by the transfer of equivalent amounts of IFCI's assets to each supporting institution.
The `critical' liabilities would include foreign repayment, dues on SLR bonds (which carry Government guarantee), investment in IFCI bonds by retail investors and investment of provident fund (PF) monies. IFCI would be required to undertake a detailed exercise to determine the amounts that are falling due on account of each of these heads.
The Government is likely to meet any shortfall between the aggregate liabilities that would be taken over and the assets that are transferred to the other lending institutions. This would be done to ensure that there is no negative impact on the transferee institution.
Sources said that the need for the Government to step in was because IFCI might not have enough good assets that could be transferred to match its huge liabilities estimated to add up to several thousand crores of rupees in the coming years. The exact details of the liabilities, however, were not available.
It is argued that once these priority liability items are taken out, the institution would have a lean portfolio, which it can service on its own. "Remaining liabilities such as individual deposits and those by banks would not add up to much,'' sources said.
The proposed package, if finally adopted by the Government, is expected to be a broad-based exercise involving a large number of lending institutions and not restricted to IFCI's institutional shareholders' as had been the case in the previous bailout attempts.
The package is on the verge of being finalised by the Government with hectic parleys on in the Ministry of Finance to give it a final shape. The urgency attached to resolving the tangle can be gauged from the fact that meetings to discuss the issue were held during the past weekend soon after the announcement of the UTI bailout scheme.
The proposed asset/liability takeover package would be quite different from the restructuring proposal mooted by IFCI's consultant, McKinsey & Co.
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