Industrial Development Bank of India (IDBI) is seeking government approval to divest its stake in Industrial Finance Corporation of India (IFCI) where it holds a 28 per cent stake.
This is based on the recommendations made by Booz Allen & Hamilton, the international Consultancy firm. S H Khan, chairman, IDBI said, I would like to divest my holding in IFCI, but the government has to give an okay. On being asked why IDBI and IFCI are not being merged, Khan said, in all mergers one plus one does not make two it might be less than two.
At IDBI, IFCI is viewed as an inferior institution and hence the merger option is looked askance. Unlike, ICICI and SCICI where both are strong institutions, IFCI is a weak institution. Earlier a demand by IFCI to be free of IDBI was rejected by the finance ministry.
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IDBI is unlikely to dilute or disinvest its holdings in SIDBI as recommended by Booz Allen & Hamilton. It is also not planning to stop its refinance operations as recommended by the management consultants. With regards to IFCI where its holding amounts to around Rs 100 crore, IDBIs disinvestment would require statutory governmental sanctions.
There was no need for a merger of IDBI with institutions like SIDBI or IFCI said Khan.
He appeared to be unimpressed by the global tendency to enhance size or spread risks by a marginal or relative increase in assets.
Apparently, the viewpoint being expressed by the IDBI top brass is that mergers often brought with them problems of logistics and functional strengths.
These views are nearly in parallax with those expressed by Booz Allen & Hamilton.