Merger of IFCI with IDBI will create jobs: Left

The Left parties might have had Bharat Heavy Electricals Ltd (Bhel) disinvestment on their mind when they went to meet United Progressive Alliance (UPA) Chairperson Sonia Gandhi today, but it did not stop them from pushing for the merger of the Industrial Financial Corporation of India and Industrial Development Bank of India Ltd.

Only two days ago, Left leaders during a meeting at the IFCI headquarters had expressed support for the IFCI-IDBI merger. Talking about the meeting, CPI(M) leader Sitaram Yechury had said the issue would be raised with the government soon.

At today's meeting, CPI leader AB Bardhan raised with Gandhi the finance minister' June 23 letter to him, where P Chidambaram had explained the "countervailing factors" due to which the merger had not taken place.

After the Bhel issue, the IFCI-IDBI merger has the potential of becoming the next stumbling block in the Left-UPA ties. Gandhi is said to have made no promises on the issue.

Chidambaram had written to Bardhan in response to his June 1 letter. Bardhan' letter was accompanied by a detailed note setting out factors in favour of a merger between the two entities.

According to Bardhan, since both entities are development finance institutions, the merger will cause "natural credit aggregation" leading to better management of credit accounts, resources and cost-effective follow-up. More resources with DFIs would lead to better "capacity creation" and in creating more jobs, he said.

"IDBI is the single largest shareholder in IFCI, though gradually this share-holding is being lowered. There is commonality of assists to the extent of 80 per cent," he said.

The merger would lead to resolution of non-performing assets, better service to clients and a balanced regional development.

In his reply, Chidambaram said IFCI had accumulated over Rs 4,000 crore in losses, which "no single bank or financial institution has the capacity to absorb. IDBI is now an incorporated banking entity, which does not allow any compromise on shareholders' interests, which a merger will entail."

He said IDBI also had "pressing problems" arising out of merger of IDBI Bank, which needed to be tackled before IDBI contemplated merger or acquisition.

He said the government "does not have any shareholding in IFCI and is in no position to secure the merger by issuing direction. The current policy does not allow investment from foreign sources for revitalising IFCI.