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June 5, 2001
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Money > Business Headlines > Report June 5, 2001 |
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Finance ministry nixes plan to provide Rs 32 bn to sick SFCsBS Economy Bureau The finance ministry has turned down a proposal to provide Rs 32 billion recapitalisation to 18 ailing state finance corporations. An expert committee on restructuring of state financial corporations headed by former Industrial Development Bank of India chairman and managing director GP Gupta had recommended a Rs 36 billion package for 18 SFCs. Sources said that the demand for financial assistance was turned down by finance secretary Ajit Kumar who was against the idea of bailing out the SFCs. Of the Rs 36 billion package, the panel had recommended that about Rs 32 billion should be infused into the SFCs to improve their capital adequacy ratios while Rs 2.30 billion would be required for funding the voluntary retirement scheme, which had been recommended for the SFCs. Even among the 18 SFCs, SFCs in Bihar, Orissa, Assam and Jammu and Kashmir would require a capital infusion of about Rs 10.65 billion. The Bihar SFC alone was expected to need a capital infusion of about Rs 6 billion in order to check the erosion of capital adequacy ratio which was projected to be-1,575 per cent by the end of the current fiscal and-1,809 per cent by the end of March 2000. The committee had recommended that of the Rs 36 billion, Small Industries Development Bank of India and IDBI should contribute around Rs 9 billion, while the Reserve Bank of India and the central government should contribute about Rs 18 billion and the remaining amount should come from the respective state governments. The committee had also said that IDBI and Sidbi should convert a part of their outstanding refinance in 20 years. Also, the cumulative preference share capital could provide support by way of tier-I capital. Preference shares should carry a coupon rate of nine per cent for a four-year period and thereafter at 10 per cent, the panel had said. Powered by YOU MAY ALSO WANT TO READ:
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