V P Shetty to head Stressed Assets Stabilisation Fund

The government has named Industrial Development Bank of India (IDBI) chairman V P Shetty as the chairman and the executive trustee of the Stressed Assets Stabilisation Fund (SASF). The bank's chief general manager Siby Antony has been appointed the executive trustee of SASF.

SASF is a special purpose trust set up by the government with a budgetary provision of Rs 9,000 crore to enable IDBI improve its asset quality.

IDBI invested the entire Rs 9,000 crore in a 20-year, interest-free, special government securities and transferred its non-performing assets (NPAs) worth Rs 9,000 to SASF.

The transfer of bad loans to SASF had led to IDBI's net NPAs falling to 2.4 per cent as on September 30, 2004 from 14.2 per cent as on March 31, 2004. IDBI was converted into a banking company and was registered under the Companies Act on October 1, 2004.

A government notification on March 18, 2005 said appointments of both Shetty and Antony are co-terminus with their terms of office in IDBI.

The SASF was without an executive trustee since IDBI executive director A K Doda opted for voluntary retirement from January 1, 2005. M Damodaran was the trust's former chairman, whose term ended after his appointment as the chief of Securities and Exchange Board of India.

The trust recovered Rs 134 crore of the bad loans transferred to it and returned the amount to the government on February 25, 2005.

SASF was constituted on October 1, 2005, however, it became functional only from December 7, 2004 after it was delegated all the necessary powers. SASF has allowed a recovery route from NPAs over an elongated time frame.

The special government securities received by IDBI are meant to be extinguished over time with recoveries from NPAs managed by the trust.

SASF has been given the status of a financial institution to enable it to pursue recovery of loans.