• PAGE ONE
• INDEX
• HOME

Merger with IDBI ruled out -- IFCI told to access market for capital

Our Bureau

NEW DELHI, April 24

WHILE ruling out any immediate plans of merging the Industrial Finance Corporation of India (IFCI) with Industrial Development Bank of India (IDBI), the Government today also deferred a decision on providing capital support to IFCI. It asked the institut ion to look for alternative sources of raising capital from the market to meet its immediate requirements.

The progress of the IFCI restructuring efforts on the basis of the D. Basu Committee report was discussed at a high-level meeting at the Banking Division, chaired by the Special Secretary, Banking, Mr Devi Dayal. The meeting was also attended by the RBI Deputy Governor, Mr S.P. Talwar, the Chairman, IFCI, Mr P.V. Narasimham, and the acting Chairman of IDBI, Mr S.K. Chakraborti.

``IFCI has to think of raising capital from the market,'' Mr Devi Dayal said briefing newspersons. Though IDBI, as the dominant shareholder in IFCI, should ideally support the institution, it too is not in a position to offer immediate help at present.

On the status of IFCI's request for a Rs 400-crore support from the Government through subscription to preference capital, Mr Devi Dayal said no decision has been taken on the issue.

Asked to comment on the possibility of a merger between IFCI and IDBI, Mr Devi Dayal said the issue did not come up for discussion. ``The merger issue was not discussed specifically. This meeting was not to discuss the merger issue at all,'' he said.

He said that a merger of the two institutions would be difficult and hinted that there might have been stiff resistance to such a proposal from within the institutions themselves.

``I cannot order the merger of anyone. Merger is difficult unless there is a synergy between the entities and the two parties are willing. There has to be distinct advantages and it has to be useful for both the parties,'' Mr Devi Dayal said.

IFCI has given an assurance that it would be able to meet all its payment obligations and that it was looking at securitisation of its assets as a way raising resources. ``IFCI has some payment obligation, including repayment of some foreign loans. The i nstitution has said that it will be able to raise resources to meet those obligations.''

It informed that it has decided to retire some high-cost debt raised during 1990s and replace them with low-cost funds raised from the market. ``It has to raise capital to continue its lending operations. IFCI will consider all these issues and work out a future business plan,'' Mr Devi Dayal said.

The Banking Secretary said that a review of IFCI's performance would be undertaken after it finalises its balance sheet for fiscal 2000-01.