IDBI to become a universal bank
By Our Banking Bureau | 29 Oct 2001
IDBI would seek to achieve this objective by undertaking a reverse merger with a private or a public sector bank. A draft proposal to this effect will be submitted to the Reserve Bank of India by October 31.
Earlier last week, IDBIs rival, ICICI Ltd, had announced that it would merge with ICICI Bank to create Indias second-largest commercial bank and the countrys first universal bank.
IDBI had earlier approached the RBI for an extension of the tenor of an existing soft loan to help it convert into a bank and to maintain additional regulatory requirements.
According to analysts, the conversion into a universal, or a one-stop bank, will allow IDBI to access retail deposits of less than one-year maturity, that usually carry low rates of interest.
The rating agency Crisil had in July downgraded IDBIs bonds and certificates of deposits to high from highest safety. It cited poor asset quality and reduced spreads, which analysts say may have made it more difficult for the term lender to tap the market for funds.
