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IDBI to be corporatised this year

The government on Thursday announced a Rs 13 billion bailout plan for the ailing Indian Bank and a package for IDBI that would be corporatised within a year.

The Budget for 2002-03 presented by Finance Minister Yashant Sinha said, "UCO and United Bank of India have turned around but Indian Bank's capital adequacy ratio remains deficient. A provision of Rs 13 billion is proposed for recapitalisation to this bank."

The government also proposed an asset reconstruction company by June to tackle the mounting non-performing assets with banks.

Sinha said the company would invite equity participation from banks, financial institutions and multilateral agencies.

He also proposed new bills on banking sector reforms for enabling creditors to recover their dues faster.

The finance minister said that reforms in financial sector had posed new challenges for development finance institutions like IDBI, and proposed to make legislative changes to corporatise it within the coming year.

IDBI's Tier-I capital is being strengthened by conversion of existing World Bank and RBI loans into appropriate long term instruments, he said.

Foreign banks would be given option to either operate as branches of their parent banks or to set up subsidiaries.

Such subsidiaries will have to adhere to banking regulations, including priority sector lending norms, applicable to other domestic banks, Sinha said.

Amendments would be proposed in Banking Regulations Act to relax the maximum ceiling of voting rights of 10 per cent for such subsidiaries, he added.

PTI

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