| Vora: Winning hearts
New Delhi, Nov. 26: A high-level meeting today decided to restructure debts owed by IFCI in order to bail out the ailing financial major.
A meeting between top officials of state-run banks and stake-holders of the two financial institutions, Industrial Finance Corporation of India (IFCI) and Industrial Development Bank of India (IDBI), decided that there will be a restructuring package for IFCI based on getting banks to agree to cutbacks in debt recoveries from it.
However, as part of a restructuring drive for IDBI, the state-run banks will help IDBI's transition into a commercial bank where the business prospects and margins are a lot better than the term-lending segment. The modalities for this will be worked out later.
Among the state-run banks which participated in the meeting were State Bank of India, Bank of Baroda, Central Bank of India, Punjab and Sind Bank, Indian Bank and Uco Bank.
“The proposal to restructure IFCI’s debts was examined by the banks. The response was very good,” P. P. Vora, chairman of IDBI said.
Earlier, this month the government had cleared the way for Industrial Development Bank of India (IDBI) to metamorphose into a commercial bank by repealing the IDBI Act. The IDBI Act is likely to be repealed in this parliament session which will enable the financial institution to corporatise and acquire a banking licence.
Vora also said “the bankers are working out a "relationship" with IDBI to enable it to tranform into a universal bank."
A group comprising top officials of IFCI and IDBI along with officials of Life Insurance Corporation, State Bank of India, Punjab National Bank, Bank of Baroda and Oriental Bank of Commerce, will work out the details of restructuring of principal and interest of the troubled IFCI next week.
Bonds — both SLR and non-SLR — would be recast to help IFCI improve its capital adequacy ratio and offer rate relief.
In the case of IDBI, Vora made it clear that the FI was not asking for any bailout since it had been “constantly” meeting the debt repayment obligations. “We do not require a bailout. We have honoured all our obligations for the last 38 years. We are ready to prepay some of our high cost debts. As part of the repositioning of IDBI, a relationship with banks is being thought of,” Vora said.
“We will provide both long-term as well as short-term credit to industry. IDBI is in the market to lend to good clients,” he added.
The Deposit Credit Guarantee and Insurance Corporation has submitted a report on IDBI’s transformation from a financial institution to a bank.