Industrial Development Bank of India (IDBI) will reap benefits worth Rs 2,000 crore by disinvesting its stakes in its subsidiary, Small Industries Development Bank of India (Sidbi) and the State Finance Corporations .
Stating this, IDBI executive director P V Narashimam added that the institution has invested Rs 880 crore in these organisations. Rs 450 crore has been invested in Sidbi and Rs 430 crore in the SFCs.
At present, Sidbi has a networth of Rs 2,000 crore and reserves of Rs 1,114 crore. Sources point out that the benefit of Rs 2,000 crore is the minimum that IDBI will get.
Finance minister Yashwant Sinha, while presenting the Union budget for 1997-98, had announced that in order to equip Sidbi to play an apex role in funding small scale industries, it would be delinked from IDBI and IDBI's shareholding in SFCs will be transferred to the Small Industries Development Bank of India.
This was also one of the recommendations of the Khan Committee on "Harmonising the Role and Operations of DFIs and Banks'". The report stated, "Since the credit requirements of SSIs are being taken care of by Sidbi since its establishment in 1990, it would be desirable to transfer the present shareholding of IDBI in these state finance corporations to Sidbi."
At present, IDBI is the second largest shareholder in SFCs holding an average stake of 40 to 43 per cent in them, while Sidbi is the wholly owned subsidiary of IDBI.
According to a senior IDBI official, following the transfer of the SFCs' stake in Sidbi, it would be strong enough to play the role of supervisor to SFCs and at the same time promote them.
However, delinking the Sidbi stake from IDBI and transferring IDBI's stake to Sidbi would require amendment of the Sidbi Act.
Besides it is not yet clear who would take over the ownership of Sidbi.
Sidbi's sanctions increased to Rs 7,484 crore in 1997-98, an increase of 15.4 per cent over the previous year's sanctions. Disbursals also rose 14.3 per cent to Rs 5,241 crore.
It registered a net profit of Rs 405.2 on a total income of Rs 1,408.5 crore in 1997-98 crore as against Rs 315.7 crore on a total income of Rs 1290.5 crore in the previous year.
This hiving off will help IDBI increase its focus on large institutions and enable it to improve its spreads since, currently nearly about 20 to 25 per cent of finance is through the SFCs which earn much lesser than IDBI will earn if it lends it out to big corporates.
