The Telegraph
Since 1st March, 1999
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Panel for govt control in new-look IDBI

New Delhi, July 24: The standing committee of finance has recommended that the government should retain its 51 per cent equity in Industrial Development Bank of India (IDBI) even as it put its stamp of approval on the plan to allow the financial institution to morph into a retail bank.

The committee, which was constituted to examine the Industrial Development Bank (Transfer of Undertaking and Repeal) Bill of 2002, tabled its report in Parliament today.

The suggestion to retain 51 per cent stake in the new retail bank was made in the light of the fact that small and large investors had invested around Rs 10,000 crore in IDBI bonds.

Last November, the government introduced the IDBI Act repeal bill, as the current act does not come under the Banking Regulation Act, to enable the country's largest development financial institution to undertake commercial banking activities.

“The government should make suitable provisions to ensure that the new entity continues to be a development bank providing term lending to industry,” the report said.

“There is no specific provision in the bill providing for the converted entity to act as a development bank. Rather the reference of development bank is being substituted by IDBI banking company,” the report said.

The bill also makes a special exemption with regard to priority sector loans, statutory liquidity ratio (SLR) and cash reserve ratio (CRR) — mechanisms by which the RBI ensures prudence in lending and capital adequacy for banking operations and, in a wider sense, control over money supply in the economy.

“The government should also grant IDBI tax exemptions for five years and permit a voluntary retirement scheme for its employees,” said the report.

The bill is likely to have a smooth sailing in this session of parliament as most of the opposition members had consented to the restructured package.

”We have also recommended that the financial institution should plan and structure the operational aspect before starting commercial banking operations,” a standing committee member said.

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