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House gridlock on IDBI revamp

New Delhi, Dec. 4: Plans to corporatise and restructure Industrial Development Bank of India (IDBI) were snagged in a legislative gridlock after the Opposition tried to use dilatory and filibustering tactics to stall the introduction of a controversial Bill that would allow the troubled financial institution to metamorphose into a commercial bank.

After a raucous debate and flared tempers, the Opposition rallied together in the Lok Sabha to oppose the Bill and forced a division of votes on the introduction of the legislation. The government, however, just managed to squeak through with 91 votes as against the Opposition’s 84.

However, the Bill was immediately lobbed to a Parliamentary Standing Committee after its introduction in the House.

Speaker Manohar Joshi refused to accept an impassioned appeal by finance minister Jaswant Singh to set a deadline for the deliberations of the committee.

The finance minister said he was ready to give in to the Opposition’s suggestion that the bill be referred to a Parliamentary standing committee. “But I insist the Bill should be returned with suggestions to Parliament on the first day of the Budget session,” added Singh.

With the Speaker refusing to accept Singh’s plea, it effectively means that the corporatisation of IDBI — a proposal that was cleared by the Union Cabinet only on November 12 — isn’t going to happen this fiscal.

Arguing in favour of the Bill, Singh said: “Any further delay in reorganising the IDBI will damage its health. It is not being handed over to a private company. It is being corporatised.”

Opposition leaders — Shivraj Patil from the Congress and Basudev Acharia from the CPM — on the other hand, argued this is the government’s first ploy towards privatising the bank.

The Opposition dug in its heels and refused to allow the Bill to be introduced. “I see no reason for turning IDBI into a commercial bank,” said Acharia. Singh insisted that the IDBI is plagued with too many ills, and if not rectified immediately, they would impair its functioning beyond redemption. “Let the Bill be sent to a standing committee. The government will take into consideration its suggestions,” said the finance minister.

The government has been loath to provide bailout funds to UTI and turned down the financial institution’s plea for bailout funds amounting to Rs 5,000 crore. But at the meeting on November 12, the Cabinet took two important decisions: it extended a Rs 2500 crore guarantee spread over five years to enable IDBI — which is saddled with huge long-term debts — to recast its debt portfolio. The other decision was to allow the financial institution to apply for a banking licence.

As a development financial institution, IDBI provided long-term loans to a host of corporates. But over the past few years, the principle of borrowing short and lending long led to severe asset-liability mismatches that cut the ground from the financial institution which has been eager to enter the retail banking segment.

For the year ended March 31, 2002, IDBI had clocked a lower profit of Rs 424 crore as against Rs 691 crore in the previous year. Non-performing assets (NPAs) rose by 17 per cent to Rs 10,466 crore and its outstanding assistance to the iron and steel sector is 15.2 per cent which amounts to Rs 7,955 crore.

IDBI’s financial problems arose when its investments running into over a thousand crore of rupees in the non-convertible debentures of a horde of known and unknown companies like Asil Industries, Atash Industries, Hamco Mining, and Jhaveri Polymers went sour.

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