IFCI bailout may get delayed

The Rs 6,000-crore bailout package for IFCI, expected to be announced this week, may get postponed till after Prime Minister Vajpayee return...

The Rs 6,000-crore bailout package for IFCI, expected to be announced this week, may get postponed till after Prime Minister Vajpayee returns from the US visit. This follows a discussion between the Prime Minister Atal Behari Vajpayee and Finance Minister Jaswant Singh on the subject during their meeting on Saturday morning, to discuss the move to put off the sale of oil majors HPCL and BPCL.

Sources say Finance Minister Jaswant Singh brought up the subject of IFCI at the tail-end of the meeting. The PM then asked if any action was being taken against those responsible for sanctioning some of the loans 8212; loans to obvious defaulting corporates which comprise the bulk of IFCI8217;s Rs 6,000 crore of non-performing assets or dud loans. The FM is to back to the Prime Minister on the detailed plan to take action before the package is announced.

Meanwhile, IFCI chairman and managing director V. P. Singh was in Mumbai today to discuss the format of the bailout with Reserve Bank of India Governor Bimal Jalan. Sources said no formal meeting has been fixed between Singh and Jalan as yet.

The package is expected to be 8216;cash-neutral8217; and the government is likely to split IFCI8217;s assets and liabilities into two. The part of the assets which consist of non performing assets NPA would be moved to the asset reconstruction company ARC.

IFCI8217;s total assets and liabilities is to the tune of Rs 20,000 crore out of which Rs 6,000 crore which are the NPAs is likely to be transferred to the ARC. The rest of Rs 14,000 crore would be kept as the healthy part.

The FI faces a redemption pressure of around Rs 6,000 crore in a time frame of two to three years. The government is likely to meet this shortfall mainly through bonds. Fresh bonds, with government guarantee would be issued and the other FIs and commercial banks would subscribe to these bonds and thus the entire shortfall would be rolled over for at least a period of six to seven years.