IDBI to begin retail banking by July

Industrial Development Bank of India (IDBI), the public sector undertaking which provides long-term finance to industries, will begin retail banking soon.

Even while performing the role of a financer to the industry, the bank will function like a universal bank before July, chief general manager of IDBI G Venkatraman said in Ahmedabad on Wednesday.

"IDBI will become a universal bank in the next three months or so. Once the notification in this regard will be published in the gazette and other formalities are completed, we will begin retail banking, latest by July this year," Venkatraman said.

He added that a set of manpower will have to be put into place to handle retail banking, which is different from IDBI's present activities.

"We will have to change with the time in order to survive. Other retail products such as home loans, consumer loans and the like will be introduced," Venkatraman said.

The Industrial Development Bank of India (Transfer of Undertaking and Repeal) Bill, 2002, has been approved by both the houses of Parliament. The Bill has also received the assent of the President.

The Bill envisages transfer of all assets and liabilities to a company to be named as "Industrial Development Bank of India Ltd".

All the existing shareholders of IDBI will become shareholders of the new company. The Bill facilitates the new company to become a banking firm, without the need to obtain a separate banking licence under the Banking Regulation Act 1949, and thus will enable it to access funds at a cheaper cost, he said.

The Bill envisages, among other things, the conversion of IDBI into a commercial bank while continuing to be a development bank which will provide long-term lending to large, medium and small industries.

The bank will be given certain regulatory forbearance, which includes maintenance of reserve requirements.

All the assets and liabilities of IDBI will, after the printing of the Bill in the gazette, vest in the new company and will be discharged by it.

The IDBI Act, 1964, will stand repealed. Any guarantee given for or in favour of IDBI with respect to any loan, finance or other assistance will continue to be operative, Venkatraman said.

IDBI was set up on July 1, 1964, as a wholly owned subsidiary of the Reserve Bank of India with a 100 per cent share holding by the government of India. At present the government holds a 58 per cent stake in IDBI.