Decision on IFCI, PNB merger by end of fiscal

A decision on the merger of financial institution IFCI Ltd with Punjab National Bank (PNB) is expected to be taken by the end of the current fiscal.

Senior finance ministry officials said the due diligence process was on at IFCI and was likely to be completed within the next two months.

"We believe there are some similarities between the two. But a decision to merge IFCI with PNB is expected to be taken by the end of the current fiscal," an official said.

The government had, during the last session of Parliament, admitted that the operation of IFCI was unsustainable and represented a risk to the stability of the Indian financial system.

The IFCI board had cleared a proposal for a merger with PNB, which had also approved the plan. At present, SBI Caps is conducting the due diligence process.

IFCI, which has defaulted on its debt repayment obligations in the past, reported losses of Rs 3,227.69 crore during the year ended March 2004.

The institution attributed the losses to provisions of Rs 325 crore for bad and doubtful debts.

According to estimates, over 50 per cent of financial institutions can be classified as bad and doubtful. IFCI has been barred from sanctioning fresh assistance and is surviving on fee-based activities and interest income.

Employees of IFCI are, however, opposed to the proposed merger and have suggested an alternative to the four development financial institutions "" IFCI, Industrial Development Bank of India, IIBI and Infrastructure Development Finance Company.

The IFCI Officers and Employees Association has also asked industry bodies like the Federation of Indian Chambers of Commerce and Industry and Confederation of Indian Industry to take up the issue of merger of the four financial institutions with the finance minister and the Prime Minister.