IFCI retail banking plans on hold

When contacted by The Indian Express, IFCI chairman and managing director V. P. Singh said that the FI has no plans for retail banking at present. “We would like to concentrate on corporate banking”, Singh added.

Almost five years back, IFCI had sent over its first proposal for foray into retail banking in keeping with the move by other FIs ie, IDBI and ICICI. The proposal had been hanging with the finance ministry and the RBI for some time.

Sources in IFCI pointed out that the permission for the FI to foray into retail banking would have given the FI access to cheaper source of funds. However, the FI then got into financial stress mainly due to asset and liability mismatch and retail banking foray took a backseat.

With the recent move by the finance ministry to allow IDBI to change over to an universal bank, hopes were raised that IFCI might also be allowed to get into retail banking. However, finance ministry sources pointed out that though the issue did come up for discussion in a recent meeting in the ministry, it was decided that IFCI should stick to corporate banking and should concentrate on cleaning up its balance sheet through the proposed restructuring.

Justifying the move V. P. Singh said that though most of the FIs are switching over to universal banking, there is still need for FIs and in this background it is justified that IFCI sticks to corporate banking. However, FI sources pointed out that the foray into retail banking would have given the FI cheap source of funds and would have brought down the cost of funds by as much as three per cent. This in turn would have allowed the FI to be competitive by bringing down the lending rates.