Corporate loans tot up to 60% of IDBI sanctions in fiscal

Industrial Development Bank of India (IDBI) is vigorously pursuing its strategy of increasing the share of non-project finance in its assets.

Non-project finance or corporate loans accounted for 60 per cent of the Rs 10,000 crore sanctions made by IDBI in 2004-05 thus far against 45 per cent in whole of 2003-04 and 37 per cent in 2002-03.

IDBI has been actively extending assistance on a selective basis to "good" corporates under various non-project finance products. The sanctions in 2004-05 have been mostly to "very good assets". The assets were "sought out" as IDBI now has the ability to compete with other banks in terms of pricing, IDBI sources said.

IDBI's incremental cost of funds has fallen to 5.92 per cent in 2004-05 from 6.40 per cent in 2003-04 and 8.35 per cent in 2002-03.

Corporate loans include normal capital expenditure, working capital, general corporate expenses and funding of business acquisition where no tangible asset creation is envisaged. These loans are repayable within five years. IDBI's sanctions aggregated Rs 5,631 crore in 2003- 2004 compared with Rs 5,898 crore in 2002-2003.

In 2004-05, infrastructure sector accounted for 35 per cent of the sanctions, core industries (textiles, metals and chemicals) 40 per cent and the remaining 25 per cent by other miscellaneous industries. Infrastructure sector's share is down from 43.9 per cent in 2003-04.

IDBI will have advantages with its conversion into a banking company and with the impending merger of IDBI Bank, it did not enjoy as a financial institution. IDBI can now have its clients' cash flows routed through an account with it.

Historically, borrowers have defaulted in payments to term lenders and never to banks funding their working capital and other corporate loan needs.

IDBI's aggregate assets, as on September 30, 2004, was Rs 63,846 crore against Rs 64,820 crore a year ago. The combined assets of IDBI and IDBI Bank now total about Rs 85,000 crore.