Gupta's announcement followed a comment by Indian Chamber of Commerce (ICC) president KK Bangur that a code of ethics, such as corporate governance, is not the responsibility of the private sector alone.

Although Gupta was tight-lipped on the composition of the working group, he said a formal announcement will be made soon.

At an ICC-sponsored interface with the industry, Gupta ruled out any further reduction in cost of credit until there is a reduction in fiscal deficit and government borrowings. "With the yield on five to seven year government paper at 12.5 per cent, FIs could not raise funds at less than 13 to 14 per cent," he said.

Addressing the chamber, Gupta said IDBI is keen onunderwriting public issues. Unless a couple of issues are successful, the confidence of the investors is unlikely to return. In fact, there was no public issue during 1998-99, only rights issue aggregating Rs 387 crore.

Gupta noted that investors will stay away from a company unless they find enhancement of shareholder value and a stable and transparent accounting policy. Some companies have been changing their accounting policies frequently and this is detrimental to the interests of the shareholders, he added.

On IDBI's sanctions and disbursement during 1998-99, he said that the figures were Rs 25,542 crore (up 6.5 per cent) and Rs 14,357 crore (down 5 per cent) respectively.

The IDBI chairman blamed the industry for the near dormant capital market.

Gupta differed from Bangur's statement that "...rescheduling of loans have been necessitated, not because of financial mismanagement but because of poor market conditions".

He pointed out that financial institutions were supportive of professionalmanagements. The convertibility clause was insisted upon only in cases of mismanagement and defaults in repayments.

On the issue of decline in loan disbursements by IDBI in 1998-99, he reasoned that "many entrepreneurs took up projects far beyond their capacities". Funds meant for setting up new companies were diverted to the capital market for speculative deals and in real estates. This resulted in low capital formation, with companies operating on low profits and defaulting in paying the FIs.

Gupta said that IDBI has begun investing in service sector industries based on their projected cash flow without any collateral security. It has also taken up several innovative methods of financing infrastructure projects in power and telecommunications sectors. IDBI is the nodal agency for funding power projects while ICICI is the agency for telecom, he added.

He felt that the Government has to thrash out clear-cut policies for the telecom sector and for funding port and road projects.

He echoed thesuggestions of the industry captains for simplification of labour laws.