Discuss the role and functions of IDBI and BIFR.
Industrial Development Bank of India (IDBI):
In March 1985 IRCI was reconstituted into a statutory corporation, Industrial Development Bank of India (EMI). The IDBI (Industrial Development Bank of India) was appointed by the government as the nodal agency to identify viable sick units, investigate the causes of sickness and design and manage packages for their rehabilitation, under the Textile Modernization Fund set up in August 1986. The main functions of IDBI are:
- Obtain loans from Central Government.
- Obtain foreign loans with Government guarantee.
- IDBI was set to act as principle credit and reconstruction agency for revival of sick industrial units.
- The organization was entrusted with the task of coordination the activities of other institution engaged in revival of sick industrial units.
- It has been vested with power to take over the management and control of sick industrial units.
- The organization can consider sick units for suitable merger or reconstruction.
- It can permit larger healthy organization to participate in rehabilitation process.
- The organization is empowered to sell of sick units as running concern.
Board for Industrial and Financial Reconstruction (BIFR):
Board for Industrial and Financial Reconstruction (BIFR) was established in under the provisions of Section 4 of Sick Industrial Companies (Special Provisions) Act, 1985.
It is quasi-judicial body with experts at various levels and has been empowered to make necessary enquire’s and determine the sickness incidence in industrial companies. Under the Act, it is mandatory for Board of Directors of a sick industrial unit to report sickness to BIFR.
The board has following operating agencies:
IDBI (Industrial Development Bank of India), IFCI (Industrial Finance Corporation of India), IRBI (Industrial Rural Bank of India), SBI and its associate banks and other commercial banks.
The main functions of the board are:
In case, the unit is identified as potentially sick, the board works to formulates various preventive, remedial or other measures.
Some of the measures/initiatives which the board may take include, financial assistance (in form of loans, grants, tax-relief, concessions, and guarantees may be extended to the identified unit to enable its revival), change of management, share capital reconstruction, lease/sale of a part/ whole of the company or merger/amalgamate the sick unit with a healthy company.
If investigation reveals that certain individual’s in management are involved in misappropriation of funds, the board may ask banking and lending institutions to refrain from extending financial assistance to such individuals/units for a period of next ten years.
At times, the board gives the identified sick unit time to improve its worth and performance.
If board after considering all facts, finds that the sick unit is must be winded, the opinion is forwarded to High Court.