New Delhi: The Union Cabinet met early on August 11 to discuss whether to restructure a leading development financial institution (DFI) into a bank.

The Industrial Development Bank of India (IDBI) is expected to be merged into its subsidiary IDBI Bank, in a reverse merger, similar to that of Industrial Credit and Investment Corporation of India (ICICI) into its subsidiary ICICI Bank.

The standing committee has cleared the restructuring Bill on finance and is awaiting Cabinet approval. The Bill will, however, not have it easy, as the Opposition is up in arms against the move saying it will be "devastating" for the country's industrial growth.

On August 10, about 50 lawmakers asked Prime Minister Atal Behari Vajpayee to ensure government's holding in IDBI remains at least 51 per cent, restore income tax benefits and retain the DFI role and permit it to raise cheaper funds.

The Opposition fears that the corporate entity will be guided by profit motive and the government would have no influence over management to carry out the development mandate given to it. In order to ensure investors' interest and avoid a run on the bank, they said government equity holding should not go below 51 per cent at any time.

ANI