IDBI decides not to fund takeovers by MNCs

Calcutta, Dec 23: The Industrial Development Bank of India IDBI will not fund takeovers by multinationals in India, chairman GP Gupta sa...

Calcutta, Dec 23: The Industrial Development Bank of India IDBI will not fund takeovers by multinationals in India, chairman GP Gupta said here on Thursday. Multinationals will have to bring their own funds if they wanted to acquire Indian companies, he said.

Addressing the executive committee meeting of the Federation of Indian Chambers of Commerce amp; Industry here, Gupta said IDBI continued to fund industrial development although there was a major shift in funding from traditional steel, cement, textiles and engineering sectors to mainly the infrastructure power sector.

Gupta said 38 per cent of the assistance sanctioned by all Indian financial institutions in 1998-99 was meant for infrastructure mainly power projects. In the April-November 1999 period, the share of infrastructure in total sanctions had gone up to 38.

Reacting to FICCI chairman GP Goenka8217;s query on whether the preponderance of short-term loans would dilute the developmental role of financial institutions, Gupta said IDBI wasfast moving towards universal banking but long-term finance would still be its predominant role.

He said signals of a quot;significantquot; recovery were visible in the growth of industrial production and exports. Gupta said the seven per cent plus growth in the index for industrial production in 1999-2000 would be led by the manufacturing sector and GDP growth would improve to about 6.5 per cent from 5.9 per cent in 1998-99.

Looked at from another angle, sanctions and disbursements by financial institutions had also shown a healthy increase. During April-November 1999, sanctions of all-India financial institutions had touched Rs 61,120 crore against Rs 54,000 crore in the corresponding period last year, while disbursements increased to Rs 35,000 crore from Rs 31,000 crore.

Rejecting the views of some industrialists that IDBI was inflexible in its group lending policy and also took an inordinately long time in disbursing sanctioned funds, Gupta said IDBI was very flexible and believed in supporting genuineborrowers. He said disbursements were delayed only in cases where the promoters had taken up projects which were too big for them to manage and without adequate resources to implement.