IDBI to seek recap funds after conversion

The Industrial Development Bank of India (IDBI) ask for recapitalisation from the government after its conversion to a bank, which is likely in a few months.

Although IDBI chairman M Damodaran did not give away the exact amount to be sought from the government, he said the figure will be in the region of a few thousand crore.

Meanwhile, the IDBI has received around Rs 400 crore by offloading its 29 per cent stake in Small Industrial Development Bank of India (Sidbi) to existing shareholders.

"Of the existing Sidbi shareholders, all but two have paid up their dues to us," Damodaran said. He, however, declined to name the two shareholders who were yet to pay up.

IDBI intends to reduce its holding in Sidbi to 19 per cent as of now.

When asked whether IDBI wanted to exit Sidbi, Damodaran said, "Although Sidbi is primarily into financing small and medium enterprises, but the borderline between an SME and a large organisation is very thin and a SME can always grow into a large organisation. We are primarily looking at co-financing projects with Sidbi."

Damodaran also said IDBI has already transferred around Rs 400 crore of bad assets to Asset Reconstruction Company of India Ltd (Arcil).

He said that the total transfer of bad assets to Arcil could be little above Rs 1,000 crore.

On recapitalisation, Damodaran said, "All the recapitalisation that has happened till date in banks were primarily of the nature of book transfer "" no transfer of cash was involved. The government has issued bonds to banks in the UCO and Indian Bank cases with the idea that they will pay back after a certain time. If the banks ask for more time, it could be at the discretion of the government to allow them more time," Damodaran said.

"We would be looking for cash neutral recapitalisation of similar nature from the government," he added.