A core group drawn from State Bank of India, Life Insurance Corporation, Bank of Baroda, Punjab National Bank, and Oriental Bank of Commerce as well as the two financial institutions has been set up to work out the new rates of interest.
Terming the talks as very frustrating for the banks, sources said IFCI was seeking to restructure half its non-SLR securities at zero interest and the rest at 6 per cent. The government has already agreed to guarantee the rollover of the Rs 2,900-crore SLR securities component of IFCIs debt through bonds at the existing rates.
Most public sector bank chiefs were present for the talks, where they also agreed to work out a relationship with IDBI to enable it to transform into a universal bank. There is no bailout. But there has to be restructuring of principal and interest of IFCIs debts. The proposal was put forth before the banks. They were examined in detail. The mood was very positive, IDBI chairman PP Vora told newspersons after the meeting. After the core group submits its recommendations, the modalities of the IFCI restructuring package would need to be ratified by the respective boards.
However, requesting anonymity, banking sources said the package would not bring IFCI out of the woods, since it owed another Rs 8,000 crore to provident funds, charitable organisations and retail investors.
They pointed out that banks would not take much of a hit because of the government-backed bonds.