RBI sources said that the bank would follow the pattern put in place through the divestment of its stake in the Discount and Finance House of India and the Securities Trading Corporation of India. In both these primary dealers (PDs), the central bank disposed off its shareholding to State Bank of India and Bank of India, and is now a minority shareholder in both these PDs. Primary dealers are the first rung in the Government securities market.

IDFC was set up in 1997 with an authorised capital of Rs 1,000 crore and a subordinated debt of Rs 650 crore. While the Government pumped in Rs 200 crore, the Reserve Bank has allocated Rs 150 crore. The Industrial Development Bank of India has also pumped in Rs 50 crore. ICICI, State Bank, andUnit Trust of India together hold 15 per cent in IDFC.

The sources said that since the financial institution has started functioning full stream, it can now move out. "We can't regulate and be a player in the same market. It will take some time to decide on whom to sell the stake," a source said. The RBI is represented on the IDFC board by deputy governor Jagdish Capoor. The RBI is the not the only one which has taken a decision to exit from the Chennai-based institution. The Asian Development Bank (ADB) has also made its intentions clear that it wants to get out from IDFC. ADB, a multilateral financial institution, holds 6.1 per cent, along with the Commonwealth Development Corporation (a British overseas development institution), Government of Singapore Investment Corporation, and International Finance Corporation holding 6.1 per cent apiece.

State Bank has lent nearly Rs 500 crore to IDFC from the Resurgent India Bonds (RIBs) -- mopped up from non-resident Indians-to be onlent towards infrastructureprojects.

As on March 31, 1998, IDFC posted profits worth Rs 40.89 crore. It has started taking part in takeout financing along with State Bank. It is also in the process of buying out power-sector loans from financial institutions.