Stakeholders to decide: Govt

No move to merge IDFC with SBI, says govt.

N S Sisodia, secretary (financial sector) in the finance ministry, said there was no question of merging IDFC with the State Bank of India (SBI) and any decision in this regard would be taken only after consulting the stakeholders.

When contacted, Sisodia told Business Standard: "There is no move to merge IDFC with SBI." The ministry is only planning to transfer the Reserve Bank of India's (RBI's) 15 per cent stake in IDFC.

However, sources said, Vinod Rai, additional secretary in the finance ministry, proposed at an IDFC sub-committee meeting here today that IDFC be made a subsidiary of SBI. Rai, a director on the IDFC board, also promised that the institution would function the way it had done all these years, they said.

"This, however, did not satisfy IDFC much," said a source. If the RBI's 15 per cent stake is transferred to SBI, which already holds 6 per cent in IDFC, the latter will become the single largest shareholder in the infrastructure funding entity.

According to Sisodia, the RBI, being the banking sector regulator, did not want to hold any stake in IDFC. "The apex bank feels if it continues to be a shareholder in IDFC it would lead to a conflict of interests," he said. On choosing SBI for taking over the RBI's stake in IDFC, Sisodia said the bank had a strong balance sheet. "There is synergy between the two institutions," he said.

Sources said foreign investors, which held 40 per cent in the company, might sell their shares if the government merged IDFC with SBI.