New Delhi, Jan. 9: The government today said it will restructure ailing state-run development financial institution, IFCI Ltd, by merging it with a state-run bank by the end of the 2003-04 fiscal year.

“Industrial Finance Corporation of India (IFCI) is being restructured through transfer of its impaired assets to an asset reconstruction company and its merger into a large public sector bank,” said finance minister Jaswant Singh. “A voluntary retirement scheme has already been implemented to facilitate its restructuring,” he added.

Bankers and analysts said the acquisition of IFCI would help the state-run bank focus on its retail banking activities while corporate banking activities would be managed by IFCI.

The government also said it would ensure and strengthen Industrial Development Bank of India’s (IDBI) role as a development financial institution (DFI) inspite it being converted into a commercial bank.

“In accordance with the mandate given by the parliament, the ministry of finance, will preserve and strengthen IDBI's role as a DFI and has started reorienting its functioning and prepare its human resources for the emerging challenges,” Singh said.

In November 2002, the government had introduced the IDBI Act repeal bill to enable it undertake commercial banking activities but with prior Reserve Bank of India's approval as the current IDBI Act is not under the Banking Regulation Act.