(a) whether the Industrial Development Bank of India (IDBI) has been facing
financial crisis for the last few years;
(b) If so, the details alongwith the reasons therefor;
(c) the alternative measures adopted by IDBI to improve its financial position;
(d) the number of bogus companies as well as those which have since been closed
to whom loans were provided by IDBI leading to financial crisis, State-wise; and
(e) the steps taken for recovery of outstanding loans?
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI ANANDRAO V. ADSUL)
(a) & (b): IDBI has not suffered any losses to date. However, the model of
development banking has come under strain. The flow of concessional funds to
IDBI from the National Industrial Credit (Long Term Operations) Fund maintained
by RBI dried up. In tune with the recommendations of the Committee on
Financial System (The First Narasimham Committee – 1991), the system of
allocating quota to the Development Financial Institution for issuance of SLR
Bonds was dismantled. The enlarged role of banks coupled with their relatively
lower cost of funds, caused pressure on the operating margin of IDBI also.
(c): The IDBI has taken measures for reducing the growing incidence of Non-
Performing Assets (NPAs). IDBI has initiated concerted moves to improve
overall asset quality by exercising selectivity in sanctioning proposals alongwith
reduction in average cost of funds through prepayment/restructuring of existing
high cost liabilities (with partial government support) and greater accent on retail
resource mobilization. The Industrial Development Bank (Transfer of
Undertaking and Repeal) Bill to provide for the transfer and vesting of the
undertaking of the IDBI to, and in, the company to be formed and registered as a
Company under the Companies Act, 1956 would enable IDBI to carry on
banking business and would provide long term sustainability for IDBI`s
operations.
(d) & (e) : IDBI has not sanctioned assistance to bogus companies. IDBI, inter
alia, undertakes a rigorous check of the antecedents of the promoters before
sanctioning assistance. Nevertheless, some companies assisted by it have
subsequently closed down due to a combination of environmental, industry
specific and unit specific factors. In order to tackle the problem of NPAs, the
IDBI is taking recourse to the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002, and DRTs/Courts. The
other initiatives taken by IDBI to reduce the stock of NPAs include recovery of
dues through Negotiated/One-Time Settlements (OTS), restructuring of
corporate debts under the Corporate Debt Restructuring (CDR) mechanism and
more focused efforts on loan recovery.