The weighted average lending rate for the year works out to 16.5 per cent, and the borrowing rate for the year has been at about 14 per cent, Narasimham said. Complementing this problem has been lower credit off-take, disbursements in 1998-99 are expected to be lower than the previous year when accounts close in three weeks' time. ``Sanctions are at the same level as last year while disbursements are lower,'' he said.

Disbursements in 1997-98 amounted to Rs 5,650 crore while sanctions had been pegged at almost double this amount at Rs 10,982 crore. IFCI had announced a net profit of Rs 370 crore in 1997-98.

FIs cannot get scared by banks lowering their lending rates,Narasimham said. It is not easy for banks to lend long-term as it is difficult for them to raise long-term liabilities, he said. About 40 per cent of banks' deposit portfolio comprises current account deposits.

Moreover, for large banks it is about 100 branches which give them 80 per cent of their deposits. ``It is not too difficult for an FI to set up 100 branches if the need arises,'' he underscored. Raising long-term liabilities is not just a major challenge before the development financial institutions but before the country also, he said.

Narasimham is not too worried about the fact that 30 per cent of IFCI's asset portfolio is in three areas -- power, steel and textiles. Exposure to power and steel is high because a number of projects have been planned in these sectors in the last few years, he said. ``The asset profile has a changing character, in the future our asset profile can get tilted in favour of telecom or power transmission,'' he said. IFCI's textiles portfolio is viewed as an albatrossaround its neck by analysts. The asset profile of IFCI is not comparable with that of either IDBI or ICICI, analysts say. A distinctive feature about its asset profile is its exposure to the cooperative sector.

Narasimham defended IFCI's decision to offer a rights issue at par vis-a-vis a bonus issue. A bonus issue is beneficial to investors in a rising market when a booming index can offer a better yield to investors, he said. ``In the current situation where the market is spurting a rights issue is equal to a bonus issue,'' he said. IFCI paid a dividend of 35 per cent last year which not many companies can boast of, he said supporting his argument.

He explained the rationale for IFCI's need for capital infusion on account of the asset portfolio rising by 15 per cent every year.