Govt exercises call option for IDBI's Rs 134 cr SASF bonds

The government has exercised call option to redeem special securities worth Rs 134 crore issued to Industrial Development Bank of India as part of the Stressed Assets Stabilisation Fund (SASF) in 2004.

This is part of the Rs-9000 crore SASF fund released in favour of the IDBI for cleaning up IDBI's balance sheet by transferring part of non-performing assets to the fund.

Under the terms of agreement, the government will release the funds and buyback the bonds of amounts equivalent to what IDBI will recover from the its non performing assets The first tranche of Rs 134 crore is equivalent to the recoveries made by SASF in 2004-05. The government would transfer money to IDBI, helping to provide liquidity, IDBI sources said.

This year (2005-06), SASF expects recoveries worth Rs 650 crore and the government would redeem special bonds worth this amount.

There was some delay in redemption for 2004-05 but for 2005-06, the institution hopes to get funds early, they said. The government has made a budgetary provision of this amount in its budget this year.

The recoveries have been good due to prompt follow-up and better earning on back of good economic growth, said IDBi officials. This tempo of recovery is expected to be maintained in next financial year also.

The government has issued non-interest bearing special securities aggregating Rs 9,000 crore in September 2004. These bonds have 20-year tenure.

The arrangement did not involve any financial assistance to IDBI. GOI has extended loan these resources were used for subscribing to special securities.