New Delhi, May 25: The standing committee on finance has recommended the merger of IDBI with its subsidiary IDBI Bank.
The committee has been constituted to study the IDBI Bill that seeks to enable the development financial institution to undertake retail banking operations.
At present, the Mumbai-based Industrial Development Bank of India holds a 57 per cent equity in its subsidiary bank, while Lucknow-based Small Industries Development Bank of India, co-promoter of IDBI Bank, holds 14 per cent.
“The committee has also recommended that the financial institution should plan and structure the operational aspects before starting commercial banking,” sources said.
IDBI Bank’s profit for 2002-03 rose 26 per cent to Rs 71 crore while IDBI’s profit slipped to Rs 401 crore against Rs 424 crore in 2001-02.
The FI has headed south ever since the principle of borrowing short and lending long led to a severe asset-liability mismatch, and has reported sliding profits in the last three years.
Last November, the government had introduced the IDBI Act repeal Bill in Parliament, which will enable it to undertake commercial banking activities, but with Reserve Bank’s prior approval. The current IDBI Act does not come under the Banking Regulation Act.
The Bill makes special exemption with regard to priority sector loans, CRR & SLR — parameters a scheduled commercial bank firmly follows according to the central bank’s guidelines.
The Bill was referred to the standing committee on finance last December during the winter session of Parliament, when the Opposition demanded a review.
Although IDBI’s liability has fallen to Rs 51,400 crore from Rs 53,500 crore in 2001-02, its asset base has also shrunk to Rs 63,500 crore from around Rs 66,500 crore.
IDBI’s gross non-performing assets (NPAs) stood at Rs 16,000 crore against Rs 14,500 crore in 2001-02. It’s investments in non-convertible debentures of companies like Asil Industries, Atash Industries, Hamco Mining and Jhaveri Polymers have turned into NPAs.
However, IDBI has recorded a higher fourth-quarter (January-March) profit in 2002-03 at Rs 209 crore against Rs 182 crore in the corresponding period of 2001-02. IDBI Bank has 92 branches and a network of 271 ATMs spread across 68 cities.