IFCI seeks tier-1 capital status
By Our Banking Bureau | 12 Nov 2001
To help IFCI to get out of its troubles, the government has directed IDBI, SBI and LIC to provide Rs 600 crore to IFCI as quasi-equity, which would be in the form of convertible debentures, carrying an interest rate of 9.75 per cent. The institutions would contribute Rs 200 crore each. The government will also be contributing Rs 400 crore to IFCI in the form of a bailout package.
But the RBI has observed that debentures, under its current guidelines, do not qualify as tier-1 capital, as it essentially comprises equity and reserves. Thus preference shares of a 20-year tenure would qualify as tier-1 capital. IFCI would redeem the instrument after a period of six years, depending up on its cash-flow position.
IDBI alone has a 31-per cent stake in IFCI and, along with SBI, LIC and UTI, holds more than 51 per cent stake in the beleaguered institution. The institutions are trying to sort out the issue for once and all.