Calcutta, Sept 6: Financial institution IFCI Ltd has begun undertaking a slew of steps to restructure itself ahead of a critical report to be submitted by an expert committee on the institution's future strategy and repositioning. The steps include petitioning the government for an additional Rs 400 crore of funding. The expert committee, led by former State Bank of India chairman D Basu, will advise the institution on the role that IFCI can play in the emerging economic and financial scenario, especially with respect to products and segments with which it can reposition itself.But even before the Basu committee turns in its report, the management of the institution has begun taking some major steps to improve IFCI's financials and make its portfolio healthier.
First among the steps is a request to the government for an additional Rs 400 crore by way of additional preference share capital, augmenting share capital through a rights issue and considering KfW funds, earlier treated as grant, as tier I capital.
This apart, the management has decided to accord a thrust on short-term products in order to strike a match between assets and liabilities, though continuing its need-based support to projects under implementation.
The institution has also begun reducing group and company exposures to 30 per cent and 15 per cent respectively of IFCI's capital funds by the year 2001-02 and ensuring greater selectivity in respect of the industries and borrowers to which incremental assistance is provided.
These apart, an intensive monitoring and restructuring of non-performing assets (NPAs), including a rescheduling of loans if necessary, where long-term viability is not in doubt and promoters are willing to make sacrifices, is also being undertaken.
IFCI has also decided to use outside experts for diagnostic studies of corporates facing problems and providing solutions for corporate restructuring. Recovery will also be stepped up through the debt-recovery tribunals and by enforcing security. It will also focus on monitoring of projects during implementation and thereafter on an ongoing basis. It will also move to settle default cases with government guarantee to improve profitability.
The Basu committee's terms of reference include examining the asset-liability profile and financials and the causes of NPAs and suggesting remedial measures and identifying the regulatory and prudential norms which IFCI has not been able to adhere to and suggesting a time-frame for the same. This apart, the panel is also expected to identify a role which IFCI would play in the emerging financial system and suggest a recast in tune with that role.
It would also go into the issue of whether IFCI would transform itself into a universal bank or remain a development financial institution in the long term.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.