International management consultant Booz Allen & Hamilton has recommended that the Industrial Development Bank of India (IDBI) pass its equity investment in the several state finance corporations to Small Industrial Development Bank of India (Sidbi), a subsidiary of IDBI. Sidbi is the nodal agency for small-scale industries.
At present, all the state finance corporations (SFCs) are jointly administered by IDBI, central government and state governments. IDBI has varying equity stakes in the SFCs and decides the operational parameters of the SFCs.
Sidbi prepares the business projects and resources forecast (BPRF) for each of these SFCs whereby it sets the disbursement targets for the year. It also provides support of 55 per cent of the targeted disbursement.
Booz Allen is of the view that since Sidbi is performing the role of funding the SFCs it should also have the ownership of its equity stake as well. While, IDBI should concentrate on its core sector to emerge as a premier financial institution, said sources.
Amendment in statutory and regulatory framework is required for IDBI to pass the SFC portfolio to Sidbi. It will also require consensus of central and state governments. This is expected to take a lot of time.
The transfer of SFC equity will not add much to Sidbis networth as that of several SFCs like those of Assam, Jammu and Kashmir, Bihar and Orrissa is nearly wiped out.
Already, Sidbi has informally approached IDBI management for disinvesting its stake, but it has not been accepted, said sources. Because the management is earning a dividend of Rs 54 crore per annum besides the two organisations are not competing with each other, added sources.
