The finance ministry is not in favour of providing further budgetary support to ailing IFCI, but is considering a proposal to restructure the oldest financial institution and then merge it with a major bank or FI other than IDBI.
"Within a month or so, the entire restructuring of IFCI will be worked out. There will be no budgetary support. There may be a consolidation," a senior finance ministry official told PTI in New Delhi on Wednesday.
After restructuring, IFCI may be merged with an FI or bank, whose balance sheet is strong enough to absorb the assets without any problem.
Life Insurance Corporation along with four leading banks -- State Bank of India, ICICI Bank, Bank of Baroda and Punjab National Bank -- are being tapped for taking over the "good assets" of IFCI, the official said.
Earlier, the ministry had considered an option of merging IFCI with IDBI. But Reserve Bank of India had objected to it, as the move would worsen the financial health of IDBI.
At present, even the ministry is not in favour of merging IFCI with IDBI, which is slated to be converted into a universal bank after the passage of Industrial Development Bank (Transfer of Undertaking and Repeal) Bill.
The non-performing assets would be first transferred to the IFCI's Asset Care Enterprise to clean up the balance sheet and then a merger plan would be worked out.
IFCI has plans to transfer all its non-performing assets into a special purpose vehicle and then to its asset reconstruction company ACE.