The Industrial Development Bank of India (IDBI) has set up a 5-member internal committee to look into the possibilities of a merger with a public sector bank.
The operational level committee was formed in the last week of December 2001. This committee is apart from the 3-member policy-level panel which is supposed to be looking at policy issues related to the proposed merger.
According to senior IDBI officials, the committee was formed to prepare a financial model assuming that the financial institution merges with a public sector bank.
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It is to make analyses of the balance sheet of some of the public sector banks (PSBs).
The committee is looking into the balance sheet of both listed and non-listed PSBs, including Dena Bank, Bank of Baroda, Union Bank of India and Punjab National Bank.
However, IDBI officials hastened to clarify that the institutions has not yet approached any bank, and the exercise is only for internal understanding.
The committee consists of three deputy general managers and two assistant general managers. The formation of the committee assumes importance as IDBI has dropped the option of a reverse merger with IDBI Bank, en route to becoming a universal bank.
The Reserve Bank of India (RBI) has also asked IDBI to complete the formalities of its plan to become a universal bank at the earliest possible. IDBI is expected to take a view on this shortly and the new committee is to provide the management with all the financial insights, to enable it to take a decision.
But sources say "The government has to take a political decision. They will have to take a view on who is going to fund the large projects with long gestation periods if IDBI transforms itself into a bank. Banks may find servicing long-term infrastructure, power projects etc a problem. The government is delaying the conversion process and there seems to be no clarity from them."
The FI had earlier formed a policy committee of three chief general mangers to look into the roadmap of universal banking.
The members of the committee were K Kameswara Rao, O V Bundellu and Jitendra Balakrishnan. IDBI had appointed Boston Consulting Group to form a roadmap for universal banking. Boston will also handhold the institution in its process of conversion.