Financial institution IFCI Ltd is exploring the option of setting up a separate asset reconstruction company in partnership with a public sector banks for which parleys have been held with Punjab National Bank. Talks have also been initiated with private players to rope in a third partner.
Institutional sources said an informal proposal has also been discussed with Punjab National Bank (PNB), which is considering the option. PNB executives added that a final decision would only be taken after a formal proposal is sent to the bank.
Sources said that IFCI would also look for a tie-up with the bank for sharing short term deposits on payment of a small commission.
They, however, did not divulge the names of any private player with which IFCI has initiated talks for picking up stake in the ARC. They added that the talks are at present at initial stages and the details on the stakeholding pattern and the management of the company have not been discussed.
IFCI chairman V P Singh said the institution has initiated talks with some multilateral bodies such as the Asian Development Bank and World Bank subsidiary International Finance Corporation.
"The International Finance Corporation, however, funds different types of ventures," he added. Setting up an ARC is part of IFCI's strategy to clean up its books of non performing assets which amounted to Rs 3,937 crore at the end of March, 2001, accounting for 20.9 per cent of the institution's total asset base.
The move to set up an ARC comes at a time when the government is trying to set up India's first asset reconstruction company by the end of the fiscal. Though a report by a high level committee appointed by finance minister Yashwant Sinha has already been submitted, the government is yet to take a final decision.
The high level committee had recommended that the ARC be set up with equity contribution of a minimum Rs 5 crore by all the public sector banks and financial institutions. Later, however, the finance ministry started exploring the possibility of roping in multilateral funding agencies also in the proposed ARC.
The committee had recommended that the initial paid-up capital of the ARC be Rs 200 crore with an authorised capital of Rs 2,000 crore.
