Said the Reserve Bank of India (RBI) in its Report on Trend and Progress of Banking in India for 1999-2001: "While income witnessed an increase of nearly 10 per cent, due largely to a rise in other income, the rise in expenditure was more pronounced, with the result that the net profits of FIs declined by 2.2 per cent to Rs 3,163.4 crore from Rs 3,232.9 crore in 1998-99". The ratio of net profits to total assets decreased to 1.42 per cent from 1.57 per cent.

Spreads of FI's were found to be much lower than those of state-run banks, which stood at 2.80 per cent and 2.70 per cent for the comparable period. "One of the important aspects of the functioning of FIs pertains to the revenues from lending. In this context, the prime lending rate (PLR) of FIs is a critical information variable since it throws light on the rates of return on lending and on the evolving structure of lending rates... in general, it is observed that there has been a gradual decline in lending rates over the period from January 1999 to January 2000", the RBI said its report.

The lending rate structure of the three major FIs reveals that while IDBI and ICICI have three types of primary lending rates - long-term prime lending rate (LTPLR), medium-term prime lending rate (MTPLR), and short-term prime lending rate (STPLR), IFCI has only two types of PLRs - long-term and short-term.

The LTPLR in the case of IDBI is a floating interest rate re-set every six months. Between January 1999 and January 2000, the primary lending rates of all the three institurions witnessed a decline. These lending rates are lower than those prevalent during the earlier periods.

Over the period April to September 2000, while the STPLR of the three institutions have either increased (as in case of ICICI) or have remained unaltered (as in case of IDBI and IFCI) vis-a-vis rates in January 2000, the LTPLR in case of IDBI has remained unaltereed, while that for ICICI has increased to 13.0 per cent in September 2000 from 12.5 per cent in January 2000. In the case of IFCI, it over the same period, declined to 13-16.5 per cent from 13.5-17 per cent FIs have been given the flexibility in raising of resources by way of bonds and debentures, subject to the overall limit linked to 10 times their net-owned funds.

During the financial year 1999-2000, total resources raised by way of bonds and debentures by three major FIs - IDBI, ICICI, IFCI - together amounted to Rs 16,311.5 crore as against an amount of Rs 29,036.6 crore raised during 1998-99 and Rs 19,404.5 crore raised during 1997-98.

Of the total resources raised during 1999-2000, Rs 4,648.4 crore (28.5 per cent) were raised through public issue and the remaining portion, which constituted the major chunk of the total resources mobilised aggregating Rs 11,663.1 crore (71.5 per cent) was raised though the private-placement route. Institution-wise, ICICI raised Rs 6,848.9 crore, IDBI raised Rs 7,676.9 crore, whereas IFCI raised Rs 1,786.5 crore during 1999-2000.