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Infrastructure Development Finance Corporation: The Controlling Battles



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Code : GOV0012

Year :
2004

Industry : Banking, Insurance and Financial Services

Region : India

Teaching Note:Not Available

Structured Assignment :Not Available

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Introduction: IDFC is the largest private sector development financial institution (DFI) in India. Post-liberalization, it was created as a vehicle to channelize ‘private capital’ into commercially viable infrastructure projects. Since its inception, the company was involved in various government and private sector infrastructure initiatives (Exhibit 1). It had many credits to it’s name including that of being a DFI with zero non-performing assets (NPAs). In February 2004, Jaswant Singh, the Finance Minister of India, in his Union Budget proposed a Rs 50,000 crore infrastructure investment fund. The government planned to nationalize IDFC by merging it with the State Bank of India and appoint it as the secretariat to the fund. This raised curtains to widespread debate over the issue of ‘nationalization’. The Financial Times of London called this as ‘backdoor nationalization’. Consequently, in mid-March 2004, Nasser Munjee,Managing Director of IDFC along with six others of the top brass of IDFC tendered their resignations. However, N S Sisodia, Secretary, Ministry of Finance said that there was no question of merging IDFC with the State Bank of India and any decision in this regard would be taken only after consulting the stakeholders.3 The board meeting held inApril 2004 acceptedMunjee’s resignation and decided tomaintain the private sector status of the company. However, insiders said that the issue of nationalization was a point of discussion in all the company meetings and there was a strong pro-nationalization group working hard to bring the new-age development bank under thewings of the government.

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