The finance ministry is believed to have finalised the merger of Kolkata-based Industrial Investment Bank of India with Industrial Development Bank of India, which will take place soon after Parliament approves the bill to corporatise the country's leading financial institution.

After the merger, the new entity would continue developmental financing but also carry out commercial banking operations including raising cheaper deposits.

The two FIs are currently facing the same problem -- their cost of borrowing is higher than cost of lending, while their non-performing assets are on the rise.

While the combined assets of IDBI and IIBI was over Rs 70,000 crore (Rs 700 billion), their NPAs were close to Rs 20,000 crore (Rs 200 billion).

To tackle the problem of IDBI, government introduced the Industrial Development Bank (Transfer of Undertakings and Repeal) bill in the winter session last year.

The Bill, which was approved by the Parliamentary Standing Committee a few months ago, could not be passed in the monsoon session.

The finance ministry hopes that the Bill would be passed in the forthcoming winter session. The merger plan would be given final shape after that.