The report--which was handed over to IDBI chairman GP Gupta last week--will be submitted to the finance ministry in the first week of December after the IDBI board formally takes it up for discussion on November 30.

Even though the report has not explicitly recommended the privatisation of IDBI by bringing down the government stake to below 51 per cent, the crux of the report is: unless the government agrees to pare its holdings the institution will neither be able to raise fresh capital nor will it be able to recruit talent and retain them in the absence of competitive remuneration packages.

Thepanel has recommended that the institution be rechristened as IDBI Corp and converted into a bank. Its subsidiary IDBI Bank should be merged with it as and when the regulatory barriers are lowered. IDBI has recently moved the finance ministry with a proposal for bringing down the government stake to 51 per cent from the current level of 72 per cent.

According to sources close the North Block, the finance ministry is likely to accept the recommendations of the Athreya committee on the restructuring of IDBI as banking secretary Devi Dayal was closely involved in the discussions that preceded the report. Four directors of the IDBI who have also contributed to the report are Dipankar Basu, SK Gupta, A Besant Raj and Tarun Das. According to sources associated with the formulation of the report, Athreya has identified the mission of IDBI as "to provide world class financial solutions and services and create wealth for shareholders".

The vision, the report says, should be to become the "leading financialsolutions and services group in India and a significant player in a chosen overseas market".

It is in favour of adopting a group approach by exploiting the synergies of all group outfits like IDBI Bank, IDBI Investment Management Company and IDBI Capital Market Services Ltd. It has, however, kept the Small Industries Development Bank of India (Sidbi) out of the group approach as the finance ministry has already decided to delink Sidbi from IDBI.

In order to facilitate faster development of a branch network, the Athreya panel has recommended the taking over of a commercial bank by the financial institution and repositioning IDBI as a universal bank with international presence.

In this context, the panel wants the institution to spread its wings and set up branches in Europe, the USA, Africa, Middle East and East Asia. Incidentally, the government is not required to amend the IDBI Act to allow the institution to go global as it can be done through a notification, finance ministry sources said.

On themanagement side, Athreya has recommended the setting up of a `cybernetic management model'. On the business side, the panel said the institution should focus on wholesale investment banking (with fee-based income accounting for 30 per cent of the total business) while IDBI Bank concentrates on retail business till such time as the two entitites are merged.

Hit hard by sluggish asset growth coupled with rising levels of non-performing assets in the face of the economic slowdown, IDBI has been unable to encash the new opportunities as it is constrained by government ownership. The IDBI board set up the Athreya panel in August to consider these issues and help it reposition the institution in the new millennium.The setting up of the panel was preceded by two brain-storming sessions on six subjects (business strategy, resource raising, NPAs, HRD, systems and procedures and new products) and the formation of five internal working groups.

IDBI's net profit in the first half of 1999-2000 has shrunk by 30 percent from Rs 705 crore to Rs 496 crore. In the second quarter, the institution has posted an even steeper fall in net profit of 40.23 per cent to Rs 205 crore from Rs 343 crore in the same period last year.The institution's disbursements went up modestly by 9.1 per cent from Rs 6,618 crore to Rs 7,218 crore during the first half while sanctions went up marginally by 3.1 per cent from Rs 12,988 crore to Rs 13,395 crore.

INSIGHT:

On expected lines
The problem with development finance institutions like IDBI is that they have long-term assets but no access to long-term funds. This mismatch can at present be tackled in two ways--either by going in for innovations such as securitisation and takeout financing, or getting into short-term finance.

ICICI has already converted itself into a virtual universal bank. The Athreya committee essentially recommends that IDBI should follow suit.With the markets increasingly becoming central to the accessing of long-term finance, the challenge fordevelopment banks is to become more responsive to markets. The private sector is now into infrastructure projects, which has specialised financial needs. A wider range of instruments and services, including guarantees, securities markets, and ratings functions, are now demanded. Development banks can meet this demand provided they recognise the change and move with it.

-- Manas Chakravarty