Idbi To Be Corporatised Via Act Repeal

The Industrial Development Bank of India (IDBI) Act, 1964, is to be repealed to enable the financial institution to become a corporate entity.

IDBI will thereafter come under the purview of the Companies Act. Until now, the functions and working of IDBI was governed by the Act.

The financial institution, which was created as a statutory organisation by an act of Parliament, will become a limited company following the annulment of the act.

IDBI sources said the institution has sought the annulment of the act, which can happen only after a new Lok Sabha is convened. The move will provide the institution greater operational efficiency as it will now become a board managed company.

 

Right now, we need to seek government approval for practically all matters... Major changes like dilution of government stake in IDBI were enabled through special notifications. But with the annulment of the Act, the board of IDBI will be vested with greater powers for decision making, sources said.

The sources added that the benefits that accrued to IDBI as a statutory organisation would be passed onto the institution in its new incarnation as a limited company.

The IDBI act was amended in 1994 to permit the institution to raise equity from the public subject to the governments holding not falling below 51 per cent of the issued capital. Following this amendment, IDBI made its initial public offering in 1995.

As on March 31, 1997, the government held a 72.14 per cent stake in IDBI. About 2.65 per cent was held by foreign institutional investors (FIIs), 11 per cent by banks

and financial institutions, 4.44 per cent by corporate bodies, 0.51 per cent by other institutional investors and 9.26 per cent by individuals.

Industrial Finance Corporation of India Ltd (IFCI), the oldest term lending institution, was also created by an Act of Parliament in 1948. But the IFCI Act was subsequently repealed in 1993 to make IFCI a limited company. After the repealment of its Act, IFCI made its maiden public issue.

Industrial Credit and Investment Corporation of India (ICICI), on the other hand, was a limited company right from its inception.