Panel advises govt on IDBI

According to the committee’s report, tabled in the Parliament on Monday, IDBI does not have a “level-playing field” with all other FIs and banks. It said “IDBI should have access to cheaper funds to undertake long-term lending in the infrastructure sector”. “Since this has to be done through short-term borrowing at market related rates in a highly competitive environment, IDBI requires special support from government,” the report stated.

The committee said that the strict prescription with respect to IDBI was contradictory to the expectation that the FI would continue with development financing. “There is a need for declaring IDBI as an infrastructure undertaking under section 10(23G) of income tax act, keeping in view its pioneering role in financing the development of infrastructure in the country,” the panel said. Although IDBI is getting tax benefits under section 10(23G) on its income from dividend, interest on long term capital gains from investments, the panel said “the only contentious issue in this matter is whether the gross income or net profit of IDBI is eligible for exemption under the relevant section.”

The issue is being agitated by IDBI before various apellate authorities, the committee said, adding “there is no bar on the government to take remedial action.” The panel further said although NABARD, National Housing Bank, Sidbi, National Highways Authority of India and Rural Electrification Corporation have obtained permission to issue capital gains bonds under section 54 EC of income tax act, the benefit has not been extended to IDBI.

“In spite of a number of representations to extend the benefit to bonds issued by ICICI, Hudco and IDBI, nothing concrete has been done so far,” the committee added.