Days after the Parliament repealed the IDBI Act, Industrial Development Bank of India is believed to have decided to remain a "stand-alone" entity initially and a merger with a big PSU bank may be considered later.

The IDBI board, which met here on Friday, has taken stock of the new situation after the repeal of the Industrial Development Bank Act to corporatise the country's largest financial institution and convert it into a universal bank.

"IDBI will continue to function on a stand alone basis now," official sources told PTI, adding there was no move to merge IDBI Bank with the parent DFI as of now. IDBI chairman M Damodaran was not available for comments.

The government has favoured merger of IDBI with a big bank like Punjab National Bank or Canara Bank, but sources said such a move would be considered later.

IDBI would comply with the cash reserve ratio obligation, but would get the Reserve Bank of India's forbearance for meeting the statutory liquidity ratio.

The government would infuse additional funds [about Rs 770 crore (Rs 7.70 billion)] in IDBI to enable it to meet the interest differential between its cost of borrowing and cost of lending.

IDBI already has a fixed deposit scheme and a bond issue in the market, from which it plans to raise about Rs 3,000 crore (Rs 30 billion) over the next few months.

Moreover, IDBI has also applied to the finance ministry for approval to raise $500 million in external commercial borrowing to assist textile units.