COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

IDBI to receive 40 per cent of FIs' share of funds from RIBs

The financial institutions would receive Rs 50 billion of the funds mopped up by State Bank of India through the Resurgent India Bonds, of which 40 per cent will go to the Industrial Development Bank of India.

Highly placed sources in IDBI said the four FIs -- IDBI, the Industrial Finance Corporation of India, the Industrial Credit and Investment Corporation of India and the Infrastructure Development Finance Corporation -- will receive a share much higher than their expectations from the Rs 170 billion ($ 4.16 billion) raised by SBI from non-resident Indians in August 1998.

''SBI will lend the RIB funds at a margin of 2.5 per cent to financial institutions. The bank has raised these funds at 7.75 per cent. After adjusting for a margin of 0.75 per cent towards brokerage charges, the cost of funds goes up to 8.5 per cent. So, the financial institutions can access the RIB funds at 11 per cent,'' said a source, adding that this is 50 basis points lower than the normal cost of funds of IDBI (12 per cent).

These funds would then be lent at a 14 per cent rate to finance infrastructure projects. ''Depending on the risk profile of the project, a margin will be set over the 14 per cent rate,'' sources said adding that this translates into the FIs making a clean spread of over 2.5 per cent by lending these funds.

UNI