New Delhi: In a bid to strengthen the development financing character of IDBI (Industrial Development Bank of India), the UPA (United Progressive Alliance) Government has revived the proposal to merge two ailing institutions - IIBI (Industrial Investment Bank of India) and IFCI (Industrial Finance Corporation of India) -- with it after segregating their bad assets.

The Government has provided Rs 9,000 crore in the Budget to enable FIs (Financial Institutions) to transfer their NPAs (Non-Performing Assets) to the Stressed Asset Stabilisation Fund by the end of this fiscal. This is being viewed as one of the steps to facilitate the mega merger.

Apart from the troubled FIs, it is now certain that IDBI will merge its private banking arm IDBI Bank and its home finance subsidiary with itself to emerge as an entity with an asset base of over Rs 1,00,000 crore comparable with only State Bank of India, sources said.

Finance Ministry officials confirmed that Kolkata-based IIBI will be merged with IDBI. But a final decision on IFCI has yet to be taken.

Finance Secretary D C Gupta indicated that the Government was not averse to the mega merger of IDBI, IFCI and IIBI.

"I will not hazard a guess. It is a matter of details. After due diligence, if it is found that this (merger of IFCI with IDBI) is a really workable proposition, then only we can proceed with it," Gupta told.

The merger would depend on synergies of operations and commercial viability would be the main criterion, he said.

While maintaining that IDBI, in which the Government has 57 per cent interest, was open to such mega merger if there is a need, Gupta made it clear that the Finance Ministry will not forcefully merge the institutions but will leave it to the respective board of directors to decide.