The country?s oldest development financial institution (DFI) is once again in the news for two reasons: 26% sale of stakes and rising stock prices. The financial sector reforms initiated in 1991 has rendered the DFI role model outdated due to reasons such as high cost of deposits, long gestation period and asset liability mismatch. While IDBI and ICICI successfully managed to convert themselves into full-fledged banks, IFCI has been left out in the cold. The state-owned Punjab National Bank sometime back evinced an interest in IFCI?s acquisition but that was not to be. The regulatory provision did not permit the acquisition as it entails amendment in the Banking Regulation Act.
Meanwhile, IFCI made a smart turnaround and it is doubtful if it can remain in the present form as a DFI. Foreign investors may be keen to acquire stakes in the bank, but in view of the restricted FDI norms for the banking sector, this is unlikely to happen anytime soon. Therefore, given the successful experiments involving IDBI and ICICI, the best option would be to hive off bad assets to asset reconstruction companies followed by IFCI?s conversion into a normal banking company. It is time to do a rethink on contining to keep IFCI as a DFI.
?Srinivasan Umashankar Nagpur
Offset edge
Will the offset clause (?Making most of defence offsets?, Oct 19) facilitate worthwhile transfer of cutting edge weapon technologies? Money without technology would take the sting out of the clause.
?Shivraj Pal Singh Lucknow