The Industrial Finance Corporation of India (IFCI) is not immediately reacting to the decision of the Industrial Credit & Investment Corporation of India to offer short-term finance at lower interest rates beginning 13.5 per cent. We are already giving short-term loans. But we have no plans to offer separate rates for them, IFCI chairman K D Agrawal told Business Standard.
Asked whether financial institutions will take away a large chunk of the business of commercial banks by entering into the short end of the market in a big way, Agrawal said: There is so much business for everybody. I think 10 more banks can come in. Where is the need to take away each others business?
He said: The core and infrastructure sectors are expected to attract new investments worth Rs 10 lakh crore in the next 10 years. Once the capital market picks up, there will be enough credit demand for all financial institutions and banks.
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Agrawal expressed the hope that the government will take a fresh look at the decision to withdraw the facility of indexation of public sector bonds. The decision mentioned in the finance bill will result in hefty tax burden on investors in deep discount bonds which provide financial institutions with at least 20 per cent of their resources.
The decision has made it difficult for the FIs to plan another issue of long duration deep discount bonds.