MoF shoots down IDBI plan to lend at sub-PLR

Our Economic Bureau/PTI

New Delhi, Aug 8: The government on Wednesday shot down Industrial Development Bank of India’s (IDBI) plan to lend at sub-prime lending rate (PLR) rate as is being done by public sector banks, mainly the State Bank of India (SBI), it is reliably learnt.

Acting IDBI chairman SK Kapur, who led a team of top officials for a meeting with the finance secretary Ajit Kumar and Reserve Bank of India (RBI) officials here on Wednesday, however, expressed his inability to divulge more details.

Officials said the financial institution (FI) was flush with funds in the present slack season, and was keen on extending loans at lower rates, but it was told that it could not go below the prime rate offered by the SBI.

An agency report said IDBI officials also discussed plans to mop up Rs 3,000 crore through bonds issue this fiscal.

The leading financial institution plans to bring down its non-performing assets (NPA) to below 10 per cent by March next from 14.8 per cent in the last fiscal, official sources said.

In the wake of the UTI fiasco, the government has apparently become wary of being caught off-guard once again. It is thus taking stock of the affairs of the financial institutions, which started with IFCI being bailed out through a Rs 1,000-crore recapitalisation.

However, when asked about the schedule for equity induction into IFCI, Mr Kapur merely said it was difficult to tell when the plan would be operationalised.

He also refused to say what proportion of the Rs 600-crore package by major IFCI stakeholders would be shouldered by IDBI.

Mr Kapur also did not elaborate on whether the road-map for universal banking was ready, but it is said that the RBI has been opposing the idea all along. IDBI had, earlier in the year, commissioned Boston Consulting Group for preparing a report on the feasibility of converting itself into a universal bank.

Officials said the move towards universal banking need not be confused with retail banking, adding that IDBI was keen on a more corporate-oriented wholesale banking concept.