Financial Daily from THE HINDU group of publications
Thursday, Jan 15, 2004
Financial Daily from THE HINDU group of publications Thursday, Jan 15, 2004 |
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Money & Banking
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Financial Institutions Merger not on IDBI radar now Sarbajeet K. Sen
New Delhi , Jan. 14 THE possibility of a merger of the Industrial Development Bank of India (IDBI) with a public sector bank now appears to be remote. Top officials of the Ministry of Finance who have been steering IDBI restructuring process said that there was no proposal at present to seek a PSU bank suitor for IDBI. Thus, once IDBI takes a firm decision on forging a merger with another banking entity, the alliance would be with a private sector bank. The spectrum of private sector banks includes IDBI's own banking subsidiary, IDBI Bank Ltd. "As far as I know there is no proposal for a merger between IDBI and a public sector bank," a senior official said. He, however, added that the final decision on a partner would be left to the board of directors of IDBI. Speculations had surfaced about a possible merger of IDBI with a large public sector bank in the immediate aftermath of the passage of the Bill to convert IDBI into a commercial bank by both houses of Parliament. The Bill was cleared by Parliament during the previous winter session. Officials, however, said that a decision on whether the institution would eventually go in for a merger or remain a stand-alone entity would have to wait till IDBI is able to put its house in order. "At present, the focus is on repositioning IDBI as a commercial bank with characteristics of a development financial institution (DFI). We have to see that the bad debts of the institution are brought down to a manageable level. A decision on merger is likely to be taken after that," officials said. The Government has assured Parliament that it would maintain the DFI characteristic of IDBI even after its conversion into a commercial bank, thereby transforming it into a unique entity in the financial market. The Ministry of Finance has also assured a recapitalisation support of Rs 2,500 crore to IDBI after its conversion spread over a period of five years, starting with a support of Rs 770 crore during the current fiscal. The lending institution would also enjoy a five-year exemption from maintaining a statutory liquidity ratio (SLR) of 25 per cent of its assets as is mandatory for other commercial banks.
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