Rs 10,607 crore incentive fund for states
New Delhi: In line with the recommendations of the Eleventh Finance Commission, union government has envisaged setting up of a Rs 10,607 crore incentive fund with which it hopes to get states to agree to a package of fiscal reforms over a five-year period.

In a supplementary report tabled in the parliament on Thursday, the government has said that it would release money out of this fund to any state willing to take on a reforms package revolving around five core issues. These would include growth in tax and non-tax revenues, reduction in wage bills, cuts in subsidies and retirement of state debt.

Mr.Yashwant Sinha, finance minister has said that a monitoring agency would be set up to draw up "state-specific monitorable fiscal reforms programmes." The monitoring agency would include representatives from the planning commission, union finance ministry and representatives of the concerned states.

The incentive grant would be partly culled out of an earlier grant of Rs 35,359 crore earmarked to help out 15 states facing a tight revenue deficit situation over a five- year period. The rest would come from matching central grants. It would be spent in equal amounts over the next five years.

States can claim shares from the incentive fund on the basis of their population. Besides the incentive-based fund, the commission has recommended linking reforms with ways and means advances and permission for additional open market borrowing.
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RBI to extend deadline for reducing bank promoters' stake
Mumbai: The Reserve Bank of India (RBI) is likely to consider the possibility of extending the deadline set for promoters of private banks to reduce their stake to 40 per cent. RBI regulations stipulate that promoters of private banks should reduce their holdings to 40 per cent by March 31, 2001.

Five of the nine private sector banks have been unable to do this due to the poor capital market conditions. These banks had urged the apex bank to extend the deadline.

The five banks, which have yet to reduce the promoters’ holding to 40 per cent, include ICICI Bank, IDBI Bank, UTI Bank, Centurion Bank, and IndusInd Bank. Most of these banks are either planning to rope in a strategic partner or float a public issue. Other banks that have already complied with the RBI regulations include HDFC Bank, Global Trust Bank, Bank of Punjab and the Development Credit Bank.
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IDBI to offload 51% stake in SIDBI
New Delhi: The Industrial Development Bank of India (IDBI) has fixed the share price of its subsidiary - Small Industries Development Bank of India (SIDBI), at Rs 30-a-share and is expected to offload 51 per cent of its stake in SIDBI.

The IDBI board has decided that it will hold 49 per cent stake in SIDBI with the remaining 51 per cent being held by banks and financial institutions, including LIC and GIC, Mr. G B Gupta, chairman, IDBI has said. IDBI is expected to make a capital gain of Rs 460 crore by offloading about 23 crore shares to FIs and banks, likely by the end of this fiscal.

The IDBI is currently working on a formula on the proportion of stake that FIs and banks like Life Insurance Corporation, State Bank of India would take in SIDBI, based on the exposure of the respective players in the small scale sector, their deposit growth and other parameters.

SIDBI has a net asset base of Rs 16,561 crore with a debt-equity ratio of 4.3 and book value of Rs 63.87 as on March 31, 2000. Ranked among the top 25 development banks in the world, SIDBI is the nodal agency for operation of government of India schemes for SSI sector, including the technology upgradation fund scheme for textile and credit guarantee scheme for SSI.
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