The Hindu Business Line : `IFCI merger with PNB will be a win-win situation'

A DAY after the board approval for IFCI merger and on his last day in office, the Chairman and Managing Director, Mr V.P. Singh, today said that the institution could still turn out to be an asset for Punjab National Bank (PNB) with which it is to be merged.

"IFCI will not be a liability on PNB. The merger will be a win-win situation (for both IFCI and PNB)," Mr Singh said. The board of directors of IFCI and PNB had cleared the proposal for a merger on Friday.

Mr Singh said that even as it is being merged, IFCI would be clearing all its liabilities to the retail investors.

Out of the last lot of Rs 1,113-crore repayment due to bondholders, the institution has already made a payout of Rs 700 crore. "We are writing to all the remaining bondholders to furnish their bonds and take the payments against them. We have also cleared all our foreign currency commitments," Mr Singh said.

The institution has also decided to ask all its fixed deposit holders with deposits of up to Rs 1 lakh to withdraw their deposits. "We will go back to our board for approval to pay even those who have deposits of over Rs 1 lakh," senior IFCI officials present at the press conference said.

Mr Singh said that the liability that still needs to be sorted out and on which no clarity has emerged as yet is that of the retirements funds placed with the institution. Out of a total residual liability of Rs 6,000 crore, the largest chunk was the Rs 1,200-crore worth of funds of the Employees Provident Fund Organisation (EPFO) for which IFCI has requested restructuring at nine per cent interest rate.

"What the EPFO decides would have a bearing on similar restructuring of liability by other institutions such as co-operative banks with whom we have held talks recently. The integrated company will have the ability to clear these liabilities," Mr Singh said.

As against gross NPAs of Rs 9,157 crore, the institution has already provided for Rs 5,195 crore. "With the assets backed by solid security such as land and machinery, the net NPA figure is very close to the realisable value," Mr Singh said. The total asset size of IFCI stands at about Rs 18,000 crore.

Mr Singh said that PNB could leverage the institution's existing expertise on project financing, monitoring, advisory services and term-lending to complement its existing business.

He said that the institution would introduce a fresh round of VRS to further reduce its existing staff of about 600.

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`IFCI merger with PNB will be a win-win situation'