The government is looking at different options for the Industrial Development Bank of India, including merging it with subsidiary IDBI Bank or a public sector bank.

"There is a proposal for restructuring of IDBI through merger. We are considering various pros and cons towards this end. It possible that the merger could be with another bank," said N S Sisodia, secretary (financial sector), Union finance ministry.

He, however, did not specify on whether IDBI will be merged with IDBI bank or a public bank. The IDBI Repeal Bill was recently passed by the Lok Sabha, paving the way for its conversion into a commercial bank. The Bill is now with the Upper House awaiting its consent.

"Forbearance is necessary only under certain circumstances. There are options where it would be necessary," he said.

The Bill allows for forbearance on statutory liquidity ratio and cash reserve ratio for five years.

On the issue of allowing UTI-I to sell its 33 per cent stake in UTI Bank, he said the government does not have direct control over UTI Bank. UTI-I, into which assured return schemes and development reserve fund have been hived off from the erstwhile UTI, is now under the special administrator.

"If such a permission is necessary then application will have to be made and the government will take a decision. However, I am not aware if our permission is required in this regard," the secretary said.

On the issue of banks returning capital, he said it will depend on the capital adequacy ratio of the banks.

Earlier, Sisodia said, in the context of banking sector, globalisation raises a host of "software" issues.

"For instance, is there an issue of appropriate size for the banking entities in a global context, do our laws need to be revisited to facilitate mergers and acquisitions, do we have the regulatory systems in place, how are the human resources to be managed for a globally competitive banking sector and so on," Sisodia said.

The secretary expressed at the high intermediation cost of banks. The interest margin at 2.8 per cent is higher than even the real rate of interest in most countries with whom we compete.