Even as finance ministry officials are slated to present oral evidence on the IDBI Repeal Bill before the parliamentary standing committee on January 27, the Planning Commission has raised objections to the Industrial Development Bank of India being converted into a bank.

In its response to the standing committee on finance, the Planning Commission has said IDBI should retain its development financial institution status.

The institution should focus on small and medium enterprises and restrict its lending to capital-intensive sectors, the Plan panel said.

Officials said the finance ministry did not consult the Planning Commission when it moved the Cabinet note on the corporatisation of IDBI.

The standing committee on finance has, however, sought the Plan panel's views on the IDBI Repeal Bill, 2002, which was referred to it in December.

The Planning Commission has, however, supported the finance ministry's initiative to repeal the IDBI Act and corporatise the institution.

With ICICI no longer retaining a development financial institution character after its reverse merger with ICICI Bank, and IFCI's weak finances not permitting it to lend, the Planning Commission is of the opinion that IDBI has a big role to play as a development financial institution.

According to senior government officials, the Plan Panel has also objected to the finance ministry's proposal to merge IDBI with another bank.

"With the huge non-performing assets IDBI has in its books, it will ruin the finances of the other bank too," said an official. IDBI's net non-performing assets stood at Rs 6,500 crore (Rs 65 billion) on March 31, 2002.

In a questionnaire to the finance ministry, the standing committee has asked how the government will ensure that IDBI plays a developmental role after its corporatisation.

It has also sought the ministry's views on the status of the 2,900-odd employees of the financial institution and whether a voluntary retirement scheme will be offered to them.