However, he ruled out buying back the institution's own paper as the price advantage of 150 basis points in the institution's paper is not much. "The price advantage in other companies' papers is much bigger,'' Khan said.

IDBI disbursed Rs 2,500 crore in the first quarter of the current fiscal. Its sanctions were pegged at Rs 5,800 crore during the period, Khan said.

The present upheavel in the domestic and international market has put paid to the grandiose plan of IDBI to enter financing of international projects, Khan said. ``Except insurance, we are not planning any other business at present,'' he added.

On delinking of Sidbi from IDBI,Khan said that apart from releasing a part of its investment locked up in Sidbi's equity, the delinking will give a sharper focus to its own role in the development of large industrial enterprises and provide greater flexibility to enter into newer areas of operations as part of its strategy to become a universal bank.

IDBI will get back its investment on the basis of book value from Sidbi. The modalities of the transfer are yet to be worked out, Khan said. Currently, Sidbi has Rs 450 crore of equity and Rs 2,000 crore of reserves. In a bid to protect the institution's interests, IDBI has decided to keep a constant watch on the corporates which have large forex exposures. ``These corporates have to now shift to the rupee loans,'' Khan said.

The sanctions and downgrading of India by Moody's Investor Service will not have any impact on the institution's operations, he said.

On the changing role of development financial institutions, the IDBI chief said that development financial institutions' (DFIs) roleas specialised institutions in India is still relevant, particularly in the context of the need to mobilise long-term funds for financing capital-intensive projects like infrastructure. If the government and the Reserve Bank of India want DFIs to continue to perform this role, their access to long-term funds of an appropriate level in some form will have to be ensured. IDBI, along with its subsidiaries, is already assuming the contours of a universal bank, Khan said. ``IDBI will, of course, have to reorganise its different business in a manner that would optimise their efficiency and make them operate as part of the institution," he added.

According to Khan, if the regulatory framework becomes supportive of the mergers and acquisitions in the banking industry, this objective will be achieved with commensurate ease.

However, such measures have to be planned very carefully and should be led primarily by viability and profitability considerations and should not be in the nature of a forced merger or abailout exercise.

Group of banks must set up ARCs: Khan The scheme of asset-reconstruction companies (ARCs) may work better if they are set up by a group of banks or financial institutions (FIs) rather than by individual banks, Khan said. For, in the latter case, being a wholly-owned subsidiary, the baggage will remain a part of the banks or FIs on a consolidated basis.Secondly, the banks or FIs transferring the NPA should be given tax benefits on account of the loss suffered by them on the transfer of assets.Without tax relief, there would be no incentive for them to transfer such assets.

Lastly, ARCs will also find it difficult to recover their dues against the assets, unless the laws relating to recovery are changed. ``Indeed, if that is done, there may not be any need to create ARCs in the first place,'' Khan said.

IDBI has to put extra effort to bring down the NPAs to the required level of 5 per cent by financial year 2000-01, he said.