IDBI to get Rs 9000 cr

Industrial Development Bank of India's (IDBI) stressed assets portfolio will drastically come down with the government decision to create a stressed-asset stabilisation fund (SASF).

Finance minister P Chidambaram has allocated Rs 9,000 crore towards this fund in the Union Budget.

IDBI's total non-performing assets (NPAs) were to the tune of Rs 16,000 crore as on March 31, 2003. The latest figures are not available. The SASF will be in the nature of an asset management trust.

The development financial institution-turned bank will transfer its stock of sticky assets to this trust, which will in turn issue zero-interest bonds to the institution to the extent of the valuation of the assets.

In the run-up to the conversion of IDBI into a commercial bank, the government has decided to clean up the institution's balance sheet. IDBI had requested the Centre for capital assistance to reduce its NPAs.

On earlier occasions, the Centre pumped in funds in Unit Trust of India and IFCI. It had issued over Rs 20,000 crore worth of recapitalisation bonds to public sector banks. IDBI's net NPA in March 2003 stood at 14 per cent.

In 2003-04, IDBI made provisions of Rs 1,540 crore up 38 per cent from Rs 1,110 crore which was provided against sticky assets in 2002-03. IDBI's provisioning requirement for NPAs till March 2007 is estimated at over Rs 7,000 crore.

IDBI chairman Damodaran in the past had indicated that the institution plans to start of banking operations with its own 100 branches. After it becomes a bank, it is likely to merger IDBI Bank with itself.