Idbi May Get Leeway On Rs 1200 Crore Debt

The Centre is planning to let the Industrial Development Bank of India (IDBI) extend the tenure of the Rs 1,200 crore Reserve Bank of India debt. The loans, which had a 20 year tenure, are set to mature in the next few months.

The matter was discussed with senior IDBI executives at a meeting convened by S K Purkayastha, additional secretary in the finance ministry's financial sector, earlier this week. IDBI chairman P P Vora also met Purkayastha and other banking division officials today.

Sources said that some sort of assistance was necessary for IDBI since the institution's financial performance has been on a persistent slide. The FI has also been asked by the RBI to make additional provisions of the order of Rs 3,000 crore towards bad and doubtful assets. In order to make the provision, IDBI would have to dip into its reserves.

As part of a Rs 5,500-crore bail-out package, IDBI had sought that the tenure of the existing National Industrial Credit (long term operations) funds from RBI -- of which about Rs 1,200 crore is due for repayment soon -- be converted into an investment with a tenure of 50 years. Similar benefits were given to the Infrastructure Development Finance Company (IDFC) last year.

IDBI has said that the government needs to infuse a minimum of Rs 3,000 crore and three alternative routes had been suggested for the purpose.

The option (mooted by IDBI) which is currently being explored by the government, involved conversion of an existing Rs 1,050 crore World Bank line of credit into a long duration debt. The balance Rs 800-odd crore could be provided directly by the government or may not even be provided.

Earlier, the matter had been discussed with RBI deputy governor G Muniappam, who had turned down the proposal of extending the tenure of LTO debt saying it was against the central bank's policy. The matter was to be discussed with RBI governor Bimal Jalan.

The ministry is also expected to take up the matter of extending the World Bank's line of credit with the multilateral funding institution, which had recently sanctioned a fresh $ 100 million line of credit to IDBI.

IDBI reported a profit of Rs 35.2 crore during the third quarter of the current fiscal, down 77.2 per cent from Rs 154.8 crore in the same period last year. In the nine-month period ended December 2001, IDBI poster a profit of Rs 242.3 crore, 55.39 per cent lower than the Rs 543.2 crore in the corresponding period in 2000.