IDBI seeks SLR, CRR breather for conversion

The Industrial Development Bank of India (IDBI) has sought more time to comply with norms applicable to commercial banks in the country on i...

The Industrial Development Bank of India (IDBI) has sought more time to comply with norms applicable to commercial banks in the country on its conversion into a corporate bank. These include partial relaxation in the crucial statutory liquidity ratio (SLR) and cash reserve ratio (CRR).

“It is not possible for IDBI to create Rs 18,000 crore of SLR paper in one stroke. We are expecting three to five years’ time for adhering to this norm. As IDBI bank is not being allowed to convert itself into a full-fledged commercial bank, such relaxations have been sought,” an IDBI source said. With the RBI’s general insistence that those converting into a bank should adhere to all norms applicable to commercial banks, sources said that as the FI was not converting itself into a commercial bank and is only converting into a corporate bank, it is seeking a relaxation in some norms by the regulator and the government.

The FI is also seeking relaxation in funds — at 3 per cent — to be kept with the RBI free of cost in the form of deposits out of the total 4.75 per cent to be kept under CRR requirement. However, the FI is ready to adhere to keeping the remaining 1.75 per cent with the apex bank as it would fetch interest at the Bank Rate of 6.25 per cent. Priority sector lending post-conversion has been an issue from the outset as the FI is transforming itself into a corporate bank, bereft of specific retail activities of commercial banks. IDBI has been seeking consideration that its infrastructure advances and investments in the Small Industries Development Bank of India and state-level financial institutions, such as state financial corporations, be deemed as priority sector commitments.

Another area of concern is bringing down the holdings in subsidiaries below 30 per cent. There is a feeling in IDBI circles that the issue may not pose any problems as the RBI had been considerate towards extending more time for requests based on valid reasons. In the same breath, the FI is also seeking not to apply with the norm of having at least one rural branch for every two urban branches a bank has. As a corporate bank post-conversion, it may not require any rural branches.