After a prolonged financial illness, IDBI is counting on its latest move to become a universal bank. Will the DFI be of some help?On December 15, 2003, the Indian Parliament approved the Industrial Development Bank of India's (IDBI) conversion into a universal bank. The government's move is significant given the fact that the Development Financial Institution (DFI) has been struggling to sustain its growth in recent times. Rising Non-Performing Assets (NPAs), shrinking asset base, lower profits and the loss of top rated clients had a serious impact on the financial health of the DFI. IDBI's NPAs, after hefty provisioning, crossed Rs.16,000 cr in 2003 on an asset base of Rs. 63,115 cr. The government wanting revival of IDBI's healthy status has decided to convert it into a banking company. The newly converted bank would be exempted from maintaining the minimum Statutory Liquidity Ratio (SLR) for a period of five years and would continue to play its development finance role.

IDBI is planning to have discussions with the RBI for development finance to be brought within the priority sector. The Parliamentary Standing Committee on finance is in favor of a reverse merger of the IDBI with its subsidiary, IDBI Bank. After the reverse merger, the government's stake in IDBI will be above 51%. Presently, the government holds 58.47% in IDBI and IDBI holds 57.12% in IDBI Bank. As soon as IDBI is converted into a full-fledged bank, it will apply for 100 branch licenses. Currently, it has 36 branch offices, of which it is planning to convert 30 branches into bank branches. Post-conversion, it would be a deemed banking company undertaking all the aspects of commercial banking and will also enter the retail banking arena.