Though Chief Minister Keshubhai Patel handed over a fresh proposal for setting up the bank to Union finance minister Yashwant Sinha during his visit here recently to inaugurate the Gujarat government's infrastructure development blitzkreig, Vision 2010, officials say the project is unlikely to be cleared at the state level itself owing to major glitches in the proposal.

To begin with, they maintain that while the state government has sought permission to lower the minimum capital needed to set up the bank from Rs 300 crore, which the finance ministry has stipulated, to Rs 100 crore, it may find it difficult to raise even this amount. "This is because the ongoing recession in the industry has resulted in depleting the coffers of both the state-owned and private-sectorcompanies," said a senior official. The state's major corporates, including pharmaceutical and power major Torrent and denim giant Arvind Mills, are in the throes of crippling financial crises.

The state government itself does not have adequate resources to make budgetary provisions to start the bank, as no extra finances are available, the official added.

Surprisingly, while handing over the proposal to Sinha, the state government has made tall claims of making the bank a viable venture within the next two years, by which time it expects to have a capital of around Rs 1,500-2,000 crore. "I fail to see the basis on which such claims have been made," said a highly-placed bureaucrat.

The Gujarat government had first made the proposal in 1992 with an initial capital of Rs 100 crore and had even received in-principle clearance from the Reserve Bank of India (RBI) in 1994. At that time, it had suggested a joint-venture format, with 75 per cent of the capital coming from cash-rich state governmentundertakings like Gujarat State Fertilisers Ltd, Gujarat Industries Power Corporation, and GNFC, and the remaining from Gujarat's three corporate giants--Torrent, Nirma, and Arvind.

With no progress being made on the setting up of the bank thereafter, the RBI withdrew its clearance in January this year, with the Industrial Development Bank of India, the main promoter of GSFC, refusing to release funds.

Following this, a fresh proposal was prepared. The proposal was projected as essentially a state government undertaking and not a joint venture.