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Financial institutions are not in a mess: Yashwant Sinha

Assuring that a slew of measures would be taken in the next couple of weeks to 'blunt' the economic slowdown, Union Finance Minister Yashwant Sinha on Friday stoutly refuted the opposition charge that financial institutions were in a mess.

"There is no impending crisis in IDBI as feared in certain quarters," Sinha said, adding that in case of IFCI the crisis was 'temporary' and the Rs 10-billion bailout package would enable to overcome it.

"We have no liquidity problem, no repayment problem in IDBI," he said.

"Let me put at rest once for all there is no problem with the financial institution and that IDBI has not approached government for any help," Sinha said replying to a brief discussion on supplementary demands for grants in the Rajya Sabha.

The supplementary demands for grants, which was returned by the Rajya Sabha, provides for Rs 4 billion for IFCI's bailout package. The remaining Rs 6 billion is to be provided by IFCI shareholders IDBI, LIC and SBI.

On Madhavpura Mercantile Co-operative Bank issue, Sinha made it clear centre has not provided any money for the Rs 8 billion bailout package and it was being taken care of entirely by the state co-operative banks.

Also he said the crisis was not due to inefficiency or malfunctioning of the cooperative bank but due to a 'criminal fraud'.

In case of IFCI, Sinha said the problem was due to a 'mismatch' in resources as it resorted to short-term loans to fulfil its long-term lending. This was being corrected now and with the Rs 10-billion bailout, the temporary crisis would be overcome, he said.

Sinha said that the government was monitoring the performance of financial institutions and banks on a regular basis and he was happy to announce that the three weak banks-- Indian Bank, United Commercial Bank and United Bank-- had improved considerably.

"If any necessity arose for budgetary support, the government will not have any hesitation to give for these banks," he said, adding that as of now there was no need for any central support for recapitalisation.

Sinha, however, hastened to add that any crisis in financial institution was reflection of the situation in the real economy, which was facing slowdown.

The finance minister also ruled out any import of foodgrain in the face of expected drop in production this year by 13 million tonnes due to drought in certain parts of the country.

Usually in such a situation, the country would have been forced to import foodgrain, he said adding with overflowing godowns due to good crop in the last eight years, the need for import did not arise, he added.

The economic slowdown was peculiar not only to India but the entire world. The international scenario was 'quite depressing' and hopefully the revival was expected from the first or second quarter of next year, he said.

Though several developing and developed economies had been hit hard by the global economic slowdown, India and China have been singled out for their performance. Even the 5 per cent growth by India has been considered good in that scenario, he added.

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