Govt refuses to budge on IDFC

Funding record poor: Finmin

The protest by the Infrastructure Development Finance Company (IDFC) brass has failed to work. The finance ministry is planning to go ahead with the transfer of the Reserve Bank of India's 15 per cent stake in the company to the State Bank of India.

"The plan stays," a finance ministry official told Business Standard, adding that North Block was annoyed with the IDFC top management's confrontationist attitude. "This is not the way to react. Confrontation is definitely not an option," added another official.

The officials, however, refused to comment if the resignations of the senior IDFC executives would be accepted. IDFC would retain its identity even if it were to be converted into an SBI subsidiary, the sources said.

Explaining the rationale behind the move, the officials said the government and state-owned banks and institutions had contributed Rs 1,250 crore to IDFC's total paid-up capital of Rs 1,650 crore.

"Hence, it is not IDFC but the government which is answerable for the institution's performance.... The funds were not doing the job they were put for," said an official.

The basic issue, which prompted the finance ministry to push for a re-alignment of IDFC, was its poor record in core sector funding, officials said. In the first five years of its establishment since December 1997, the institution's total sanctions stood at Rs 12,400 crore, while its cumulative advances were just Rs 4,100 crore.

The officials said under pressure from the stakeholders, IDFC stepped up its sanctions by 150 per cent to Rs 3,579 crore in the first nine months of the current financial year compared with Rs 1,400 crore during April-December 2002. Disbursement also rose 120 per cent to Rs 1,500 crore during April-December 2003 compared with Rs 685 crore during the corresponding period in the previous year.

IDFC executives, however, said the institution planned to significantly increase its advances during the current financial year by disbursing around Rs 3,000 crore. They said there was a significant demand for funds from the power, telecom and the aviation sectors, which witnessed a lull during the last few years.

"The main issue is the quality of infrastructure projects and not funding," said an executive.