Expressing displeasure at the lack of enthusiasm on the FI's nominees even in attending company board meetings, Krishna Murthy said the finance ministry is actively considering to set standards of their involvement in the company governance.

However, the fresh guidelines will not be a part of the enactment of the recent ordinance promulgated for amending the Companies Act. The guidelines will be issued separately, he said talking to reporters after the 26th all India conference of corporate managers and tax executives, organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) here.

On suggestions to relax the level of private placements in buyback of shares, the DCA secretary said, "we are considering options of relaxing upto 100 per cent from the present 60 percent.''

Krishna Murthy defended the 24-month cooling off period after buyback of shares saying, "the company can not take buyback issue lightly.''

The government has allowed buyback to give an opportunity for companies to undergo restructuring and restrengthening of their market position.

Our Mumbai Bureau adds: Financial institutions have decided to turn the heat on corporates. The institutions have made the pledge of promoters' shares mandatory for any new exposure to the existing projects in all sectors. They are also insisting on a tougher debt: equity ratio (1:1) across all industries with prospective effect.

"We should have taken this stand earlier. The objective is to discipline the promoters in implementation of new projects and hold them accountable," said institutional sources.

The trigger point was the state of affairs in the steel sector where the term lending institutions--which have had a sizable exposure-- have agreed to commit fresh funds on condition of promoters' pledgingshares with them.

"It is not only the five last-mile steel projects where we are demanding pledge of shares -- with voting rights -- as a necessary precondition for fresh infusion of funds. Henceforth, in any sector where ever there is a cost or time overrun and the promoters are asking for concessions in terms of fresh funds infusion or moratorium on repayments, we are asking for pledge of shares," sources said.

The "drastic" step has been taken at a recent meeting of the heads of institutions. "With the pledge of shares, the voting rights comes automatically. If any problems crop up, the institutions should be able to bring in a new management," sources said.

Senior executives of term lending institutions, however, admit that there has been resistance from the corporates. "We are going ahead despite this... The tough steps should be taken now when the country is facing an industrial slowdown. If a promoter is found unfit to run a company, we need to change him even though that is not an easy task,"sources said.

Term lending institutions are working out a collective approach to combat the "clout" of promoters. "We will bring in changes in documentation of all new loan agreements which will strengthen our stance," institutional sources said.

There has been a consensus among institutions to insist on a stricter 1:1 debt:equity for all projects across all industries. "We are in the process of implementing the revised debt equity ratio for all fresh sanctions. As far as the existing projects are concerned, the new debt:equity ratio will be applicable for fresh loans for expansion and modernisation," sources said.

Senior executives of financial institutions, however, admitted that it might not be possible to go for a 1:1 debt:equity ratio for all projects. For instance, they may have to settle for a higher debt equity ratio in the power sector. "Ideally, all projects should have the 1:1 debt equity ratio. However, we may to relax the guidelines for some sectors like power," sources said.

Theobjective behind the tighter debt:equity ratio is to reduce the interest burden of corporates. "If a company is not making profit, it can skip dividends. However, there is no escape for the debt repayment even when it is passing through the worst of times. With a stricter debt:equity ratio, the interest burden of the company will get substantially reduces," sources said.