Disbursements Up, Sanctions Down

Augmenting the role from a lending institution to that of a partner for its borrowers helped Industrial Development Bank of India (IDBI) to hike its disbursements in the financial year 1996-97. This included adopting more flexible lending norms on a case-to-case basis and also rescheduling loans of a lot of corporates that were cash-strapped.

Though overall sanctions by IDBI dipped by four per cent to Rs 17,050 crore in fiscal 1996-97, disbursements by the institution moved up by seven per cent to Rs 11,435 crore.

The financial year witnessed a sluggish industrial growth. The GDP met the expected levels of 6.8 per cent propelled by agricultural growth of around four per cent in 1996-97. Deceleration in industrial production was prominent in manufacturing at 9 per cent as against 12.8 per cent in 1995-96. Mining crashed to 1.4 per cent in 1996-97 from 7.8 per cent, electricity went down to 3.8 per cent from 8.6 per cent.

Announcing the results at Mumbai, S H Khan said, "Fall in sanctioned amount by us is due to subdued industrial growth in 1996-97. However, disbursements, especially under direct finance category by IDBI, achieved an unprecedented growth of 55 per cent, which reflects the confidence of the corporates in implementing the projects already undertaken."

IDBIs lendings are broadly under three categories--direct finance, bills and re-finance. Under direct finance, the institution has categorised the loans under project and non-project finance.

However, the major operations of the institution are in the direct finance category which comprises nearly 87 per cent. The bills and re-finance mode of financing is at around eight per cent and five per cent respectively.

Disbursements under project finance swelled 55 per cent to Rs 7,085 crore in 1996-97, from Rs 4,580 crore a year back. But sanctions were stable at Rs 9,578 crore as against Rs 9,581 crore seen in 1995-96.

"We asked the promoters to chip in more from their side. Besides, IDBI also increased equity contribution. Also, IDBI allowed promoters to raise funds through rights and private placement, said Khan.

Flexible approach adopted by IDBI helped the industry, which in turn helped the institution in increasing its lending operations, Khan added.

In some cases, the financial institution did not stick to the stringent debt equity norms.

Says Khan, In case we felt the project could bear additional debt, we increased the debt equity ratio. IDBI has also rescheduled a lot of loans taken by leading corporates as they were cash-strapped. This, in fact, prevented the loans being classified as NPAs, which facilitated further drawal by borrowers.