This was possible primarily because of a massive 19 per cent growth in assets and substantial write-offs in 1997-98. In comparison, the rival Industrial Credit and Investment Corporation of India (ICICI) had reported a growth in NPAs both in absolute as well as in percentage terms. Its NPA as a percentage of its total assets grew from 6.8 per cent to 7.6 per cent in 1997-98, while in absolute terms it grew from Rs 1,950 crore to Rs 1,810 crore.

IDBI has the largest NPA exposure to the steel industry at 14.5 per cent followed by 11.2 per cent for textiles, 9.7 per cent for other chemicals (excluding petrochemicals) and 6.9 per cent for synthetic fibre.

IDBI chairman and managing director SH Khan hasidentified steel, synthetic fibres, cement and automobiles sectors as the four "dangerous" sectors so far as the quality of assets is concerned. All these sectors, according to the IDBI chief, suffer from a supply overhang.

IDBI's assets grew by Rs 9,628 crore to Rs 59,957 crore in 1997-98, which is the highest-ever growth recorded by the financial institution in its history.

Khan strongly denied any attempts by the institution to convert NPAs into performing assets by way of issuance of fresh loans and NCDs. "We have given fresh assistance to only those units that are suffering temporarily due to the industrial slowdown. This is temporary accommodation and not an attempt to bail them out. It has not in any way affected the classification. Every NPA has been provided for. Also, all the guarantees extended by us, barring Rs 150 crore out of a total portfolio of Rs 4,000 crore, is project related. All the NCDs issued by us are mainly for the telecom companies," Khan said.

Khan said IDBI was able to makesubstantial recovery of NPAs due to the concerted efforts made by it in 1997-98. IDBI had constituted special recovery cells in head office and branch offices as per the recommendations made by Booz Allen last year. The NPAs are closely monitored by credit committees at head office and zonal offices. "This has led to a substantially higher growth in overall recovery during the year. Further, the process of one-time settlements in regard to units, which has lost financial viability, has continued, he said.

Of the total 10.1 per cent NPAs, 7 per cent is classified as standard assets and 3.1 per cent classified as doubtful assets.

Arthur Andersen to develop ALM policies

The Industrial Development Bank of India (IDBI) has appointed Arthur Andersen to establish an effective asset-liability management (ALM), chairman SH Khan said.

The consultancy firm would among other things help develop ALM policies, establish an appropriate ALM organisation structure, identify ALM software optionsand assist IDBI in the pilot implementation of the ALM information process.

It will submit its report within six months, Khan said.

"It is very difficult to manage asset-liability mismatch when the interest rate scenario and the liquidity in the system are highly volatile. We cannot raise long-term funds. "In fact, it is extremely difficult to raise beyond three to five year funds, that too with call and put options," Khan said.IDBI will aim at raising long-term resources through infrastructure bonds and tapping pension funds and provident funds, Khan said.