| IDBI's provisioning requirement for non performing assets till March 2007 is estimated at over Rs 7,000 crore. Of this around Rs 2,500 crore is likely to be set aside by September 2004. The remaining Rs 5,000 crore will be provided for by transferring the government assistance into a separate fund. |
| If the proposal is cleared by the government, the Centre would have provided nearly Rs 9,500 crore since March 2002 to India's largest FI. |
| In November 2002, the Centre decided to provide Rs 2,500 crore to the institution to bridge a interest gap following a decision by state-owned banks and insurance companies to reduce interest rates on bonds issued by IDBI. |
| "There is no problem with the financial health of IDBI. The proposal is only aimed at maintaining the flow of credit for developmental activities including those in the infrastructure sector," a finance ministry official said. |
| The Rs 7,000 crore loan through a new fund "�Stressed Assets Stabilisation Fund "� is proposed to be repaid by IDBI over 25 years. Apart from the initial contribution from the government, IDBI plans to plough back a part of its profits into the fund, an executive said. Tax benefits for ploughing back the profits have been sought by the financial institution. |
| According to IDBI estimates, the institution would be required to make the necessary provisions for loans given to projects which have been in the pipeline for a number of years, in addition to loans extended to steel, textiles and cement companies, which have recently been restructured through reduction of interest rates and extension of repayment period. |
| The move to extend financial support to IDBI comes after finance minister Jaswant Singh appointed the institution as the lead developmental finance institution for project financing. |
| In December 2003, the government had assured Parliament that IDBI would continue its development finance activities even after its conversion into a bank. |
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