The institution has substituted two five-year privately-placed omni-bond issues borrowed at 16.64 per cent with 12.5 per cent by exercising the call option at the end of third year.

The institution which had borrowed Rs 300 crore during January 1996 and Rs 600 crore during July 1996 as a part of the Omni Series bonds will be replacing it by funds mobilised through on-tap route.

The institution which is yet to open its private-placement route for the current year has no other plans of high-cost debt substitution.

In the case of its popular 25-year deep discount bond it will be able to exercise the first call option only next yeardeep whose cost is pegged at 16 per cent.

"There are so many ways the institution can bring down the earlier high-cost funds," said a top official of the institution. While the cheap fresh borrowing for retiring the high-cost borrowing is regarded as a measure of "on balance sheet" exercise, availing the interest-rate swap for the same is termed as "off balance sheet".

"We will shortly open our account in this front," said the IDBI official, adding that the institution's board is yet to approve the use of the derivative instrument.

IDBI has an extensive exposure in using this instrument in the international market and is busy putting internal controls in place for undertaking the same in the domestic market.

Both the act of delegation of power and identification of counter party limit has to be completed before the institution's board gives its approval for the use of the derivative.