IDBI facing identity crisis, says its chairman

IDBI facing identity crisis, says its chairman
EEB & AGENCIES

Kolkata, Feb 24: The Industrial Development Bank of India (IDBI), the country's largest Financial institution, is now facing an identity crisis, according to its chairman.

Although the entity was formed to perform the role of a development financial institution (DFI), it has now been reduced to a financial intermediary, IDBI Chairman S K Chakrabarti said today. "We do not know about the future of IDBI," Chakrabarti said.

The institution was finding it difficult to undertake developmental work due to rise in finance cost, he said at a meeting organised by the Bengal National Chamber of Commerce here.

The chairman said IDBI used to get cheap finance at low rates from the government in the form of SLR bonds and equity. Now that money was gone, the institution was being forced to raise money from the market, thus raising the cost of funds.

Chakrabarti said if given the option either to become an NBFC or an universal banker, IDBI would opt for the second. The institution was already in the process of charting out the roadmap in this regard, he said.

The IDBI chairman said that once it became an universal banker, then access to low cost funds would be there. This, in return, would bring down interest costs on borrowings.

Criticising the Indian industry for not being able to bring down costs, Chakrabarti said this was reducing the country's competitiveness in the world market.

He said most Indian corporates were not paying enough attention to two crucial aspects, inventory control and receivables management. This, he said, was raising the working capital demand for the Indian industry.

To survive in the WTO regime, the IDBI chief said, the industry would have to concentrate on exports and research and development. In India, R and D was totally neglected, he said. On IDBI's assistance to Indian industry, he said out oftotal funds provided, one-third was earmarked for the infrastructure sector like roads, power and communications.

He also said the dormant financial market, both debt and equity, was causing problems for corporates to raise funds.

IDBI now plans NPA management company
KOLKATA/MUMBAI: A new "Asset Reconstruction Company" to take care of the non-performing assets (NPA) is on the final stages of preparation, said IDBI chairman SK Chakrabarti in Kolkata on Saturday.

"The increase in NPA is a cause for concern and we need to tackle this as it is now 13.8% of the total assets. And so we have proposed to the government to set up an NPA management company and it is on the anvil to take over the NPAs," said Chakrabarti while meeting the Indian Chamber of Commerce.

Chakrabarti said this in response to the ICC's concern for the need for a strategy for reducing and writing off NPA and allow productive assets to come in. IDBI has NPAs of Rs 7675 crore as of March 2000.

"In the next five years IDBI is going to disburse a sum of Rs 57,000 crore and there will be tremendous opportunities. We are ready to finance projects. The banks too, I think are ready and the infrastructure is also good. So others should be ready too," he said.