The government plans to stop the lending operations of IFCI Ltd, a non-bank lender, and convert it into an infrastructure advisory firm. This decision comes after IFCI faced capital shortages due to rising bad loans, two government officials told Reuters.
IFCI, previously Industrial Finance Corporation of India, is a development finance institution under the ownership of Ministry of Finance, Government of India. Established in 1948 as a statutory corporation, IFCI is currently a company listed on BSE and NSE.
Why is the Change Happening?
IFCI, established in 1949, was directed to stop new lending in 2021-22. The decision followed a sharp increase in bad loans, which hurt the lender’s capital and liquidity.
The government currently owns 72% of IFCI. Officials and representatives from the finance ministry and IFCI did not comment on the development.
Focus on Infrastructure Advisory
India is heavily investing in its infrastructure sector, with spending expected to grow threefold to ₹11.11 lakh crore by 2024/25.
As part of the revamp, IFCI will not resume lending. Instead, it will focus on offering advisory services for state governments, especially for infrastructure and green projects. Officials said the government wants IFCI to follow the advisory model of SBI Capital Markets, the investment banking arm of the State Bank of India.
Financial Support for IFCI
The government plans to infuse ₹500 crore into IFCI this year. Future funding will be limited to helping IFCI meet repayment commitments.
Merger and Stock Performance
On Monday, IFCI’s board approved a merger with its subsidiary, StockHolding Corporation of India, following a recommendation from the finance ministry. The Department of Financial Services (DFS) under the Finance Ministry has given its in-principle approval to proceed with the consolidation of the IFCI Group. This proposed consolidation involves the merger or amalgamation of IFCI Limited, StockHolding Corporation of India Limited, and other group companies under IFCI Limited. Click here to read about IFCI merger in detail.
Monetizing Real Estate Assets
To generate additional income, IFCI will monetize its real estate assets and lease office spaces. In fiscal 2024, IFCI earned ₹42.7 crore in rental income and reported a profit of ₹130 crore.
right action at right time taken by FM
otherwise it will be converted into bankruptcy and like Sahara, Sanjeevani and other co-operative societies, one more scam would be burden for the Govt.