The Hindu Business Line : End of the road for a 10-year-old bank?

Top news about IIBI, at the time of writing, is from the Institute of Innovation in Biotechnology and Industry in Santo Domingo, Dominican Republic, on how that country has become the first producer and exporter in the world of ginger `vinegar', as www.freshplaza.com informs.

On the Web, though, IIBI gets as the first search result `Institute of Islamic Banking and Insurance'. But, closer home, IIBI is the Industrial Investment Bank of India, a Kolkata-based development financial institution. Sadly, the bank formed less than a decade ago, is facing imminent closure.

IIBI was formed by converting IRBI (Industrial Reconstruction Bank of India). And there were avatars previous to that. "The IRCI (Industrial Reconstruction Corporation of India Ltd), set up in 1971 for rehabilitation of sick industrial companies, was reconstituted as IRBI in 1985 under the IRBI Act, 1984," says Wikipedia. "With a view to converting the institution into a full-fledged development financial institution, IRBI was incorporated under the Companies Act, 1956, as IIBI in March 1997."

The page on http://en.wikipedia.org continues: "IIBI offers a wide range of products and services, including term loan assistance for project finance, short duration non-project asset-backed financing, working capital/ other short-term loans to companies, equity subscription, asset credit, equipment finance as also investments in capital market and money market instruments."

Old story, that is, because things were bad even when the bank was formed, saddled as it was with the baggage of NPAs (non-performing assets) inherited from the predecessor institutions. Thus, when, in August 2002, Dr B. Samal, CMD (Chairman and Managing Director) of Allahabad Bank, took over the additional charge of acting CMD of IIBI, he identified the reduction of the NPAs as the thrust area. The net NPAs as on March 31 that year stood at Rs 614 crore.

Not surprising, because since inception, IIBI was engaged only in financing sick units, and as a result, its portfolio consisted of a large number of NPAs.Dr Samal had then spoken of `several good things about IIBI' such as how the bank had not defaulted in servicing its liabilities. For instance, in 2001-02, Rs 777 crore had been serviced through retirement of Rs 268 crore of high cost debts executed through call options.

And the cost of fund too saw a fall, from 12.45 per cent in 2000-01 to 12.04 per cent in 2001-02.

Things turned worse by March 2005, when the Finance Ministry spoke of merging the ailing organisation with Industrial Development Bank of India Ltd (IDBI). "IIBI's balance sheet and its staff can be easily absorbed by IDBI," the Ministry's officials had said then. But IDBI was not keen on the takeover.

Ten years is too short a period from birth to death of a bank, though a quick end is what stares in the face of IIBI, as a distinct possibility. But IIBI employees have not given up, yet, it appears.

According to sources in the employees' association, representations have been made with the management, not only against `option form' issued to the staff, but also against the reason cited for closure, viz. large accumulated losses.

Employees say that the institution has made `an operating profit of Rs 20 crore for the half year ended September 30', and that to close down the organisation on the plea of losses is no longer valid in the eyes of the law.

E&OE@TheHindu.co.in

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