Rbi Pulls Up Ifci For Poor Asset Quality

It has asked the financial institution to rectify deficiencies in its asset quality and loan disbursals. An inspection conducted by the RBI under section 45 (n) of the RBI Act, 1934 highlights the need to improve certain areas of IFCI's operations, sources said. However, officials of the central bank at Mumbai refused to discuss the issue. When contacted, IFCI sources said that the inspection report is yet to be discussed by the board.

The financial institution recorded a massive profit of Rs 355 crore last year on an asset base of Rs 12,906 crore.

Nevertheless, the RBI considered the NPA figure of 9.2 per cent at Rs 1,187 crore to be extremely high by industry standards, which otherwise could have increased the profitability of the corporation.

 

Its shares are still being traded below par despite the fact that the earning per share has gone up to Rs 10.07 from Rs 7.79 in 1994-95.

Moreover, the exposure of 17.1 per cent of the total disbursements in the last financial year to iron and steel industry was considered high and risk-prone. RBI's prudential norms limit the exposure to a single industry to 15 per cent.

It is against this backdrop the apex bank has asked the corporation to take specific measures to reduce the NPA level and check the risk factor involved in exposure to any one industry, sources said.

This is the first-ever inspection by the central bank carried out on a financial institution, and it is likely that certain shortcomings are bound to be present in other areas of operations also.