y IIBI was initially set up as Industrial Reconstruction

Corporation Limited in April 1971 under the companies Act, 1956. y It was renamed Industrial Reconstruction Bank Of India with effect from March 20, 1985 under IIBI Act 1984 to take over the function of IRC. y During 1997 the bank was converted into a Joint Stock Company by naming it Industrial Investment Bank Of India Ltd.

y Its head office is at Kolkata. y Its earlier function was to provide finance for industrial

rehabilitation and revival of sick and closed industrial unit by way of rationalization, expansion, diversification and modernization and also to co-ordinate the work of other institutions for this purpose.
y With changing environment, the bank has converted itself

into an All India Financial Institutions which provides loans and other support to healthy unit as well and under takes the investment functions, or running itself on profitable lines.

Sicky SSI units should be considered sick if :y - Any of the borrowal accounts of the unit remains

substandard for more than 6 months i.e. principal or interest , in respect of any of its borrowal accounts has remained overdue for a period exceeding one year y - There is erosion in the net worth due to accumulated cash losses to the extent of 50% of its net worth during the previous accounting year and the unit has been in commercial production for at least 2 years.

y IRBI provides term loans and working capital finance to

medium, large, small and tiny sector units. It also provides ancillary services, such as consultancy, preparation of schemes of amalgamation, merger, sale, reconstruction, equipment leasing, merchant banking etc. thus, IRBI has been vested with wide powers to take any steps to curb industrial sickness under the Act.

Small and Tiny Industries

y For SSI- Investment ceilings -Rs. 1 cr to Rs. 5 cr y For Tiny Units it engaged in manufacturing, processing, preservation of goods, mining, quarrying, servicing and repairing of specified type of machinery and equipment, agro service units, where the investment in plant and machinery does not exceed Rs 25 lac (wef Dec 1997), irrespectively of location of the unit. y Cottage industry:- Artisans or small industrial activities in villages and small towns with a population not exceeding 50000, involving utilization of locally available natural resources and/or human skills where individual credit requirement do not exceed Rs 50000.

y Need y The need for setting up IRCI as the agency of the

development financing institutions already in existence in the context of the depressed industrial climate due to mismanagement, unsatisfactory labour relation and non availability of raw materials etc. y Management y The management of the IRCI is vested with the board comprising 15 directors. The chairman cum managing director is looking the daily affairs of the organization.

Major Beneficiaries
y The IRCI assisted a fairly wide range of industries. Till

1983, major beneficiaries were. Textiles Rubber products Transport equipments Basic metals And Electrical machinery y These industries counted for 75 percent of the total sanctions and the balance was in the form of supplementary assistance for various purposes.

y The authorized capital of the IRCI was Rs. 25 cr of these

Rs.20 cr. has been subscribed to and paid up IDBI, LIC, ICICI, IFCI, State bank of India and other nationalized banks. The IRCI raises resources by issuing bonds guarantee by the Govt. of India.

Functions
Functions can be categorized as: Loans and Advance to the industrial units mainly for the purpose of rehabilitation. Underwriting of public issue. Guaranteeing the loans/deferred payment of other obligations of industrial concerns. Providing the infrastructural facilities, managerial and support facilities to the industries.

Take over the possession and management functions of defaulting industrial units and transfer of their assets by way of sale or lease. Preparation of scheme for reconstruction by merger or amalgamation. It provides working capital. Helps in solving labour management problems of the sick industrial units.

Performance
y In context of the organizational restructuring process and

improving corporate governance, multi disciplinary committees were setup in 2000. the main emphasis was on pro active risk management, improvement in portfolio quality, monitoring of assets, and enhanced management effectiveness. A corporate management team was made to ensure that official take responsibility and provide leadership in the organizational transformation process.

y The IIBI has installed risk management software for risk

scoring and risk analysis. The process and system risk management dept. is engaged in examining various process of operations and services with a view to improving them. The IIBI has systematized the loan review process with framing of detailed operating guidelines for loan workout/ negotiation strategies, execution of approved strategy and review.

NPA Management
y The IIBI has introduced a separate formal loan review and

workout process for NPA, substandard assets categorized on the basis of default duration and doubtful assets based on legal status are reviewed. y In the case of substandard assets, the strategy includes negotiation for solution within given time frame and legal action thereafter if negotiation for recovery fails, pursuing with lead in consortium financed cases and restructuring of liabilities wherever required.

y Efforts have also been made to reduce transaction and time

and ensure proper investor service the IIBI has revised the prime lending rate in the line with the market rate of interest, with softening the interest rate environment and overall economic slowdown the IIBI has been passing on such benefits to its clients. The IIBI has been in a continuous process of reorganization and restructuring to eliminate organizational weakness and create quality organizational assets capable of nurturing risk management relationships.