In contrast, ICICI takes pride in becoming what it calls a "virtual universal bank". The latter has also focused on the short-term end of the market, and much of its incremental business during the economic downturn has come from expanding its short-term lending. Athreya's proposal to convert IDBI into a bank advocates the same strategy. Added to that is the advice to bring down Government stake in IDBI, which is the only way to make it more competitive, as well as attract more capital.

As a result of liberalisation, DFIs have been denied long-term funding support, but their traditional role as providers of long-term finance is still expected of them. This anomaly has caused a severe funding mismatch, with DFIs being forced to rely onshort-term money to fund long-term assets.

Moreover, banks, with their lower cost of funds, have intruded into their preserve of long-term lending. These trends have affected DFI bottomlines, which are also under pressure due to restructuring in the industry, which has led to increased NPAs.

In capital-short India, development financiers have a definite role. But the role's character has changed, from being a provider of plain vanilla long-term loans to an investor in new instruments, a provider of value-added services, and new means of packaging and trading debt, such as securitisation.

In other words, the DFIs have to change with the way the market for long-term finance has changed. Merely becoming banks is not enough.