The parliamentary standing committee on finance on Thursday approved the repeal of IDBI Act, paving the way for the conversion of Industrial Development Bank of India into a bank.

The Industrial Development Bank (Transfer of Undertaking and Repeal) Bill of 2002, which was introduced in the winter session of Parliament last year, was referred to the standing committee.

The report of the panel - headed by Janardhana Reddy - which was tabled in Parliament on Thursday, strongly recommended the government to retain its 51 per cent, grant tax exemptions for five years and offer a voluntary retirement scheme.

The panel also asked the government to make suitable provisions to ensure that the new entity continues to be a development bank providing term lending to the industry.

There is no specific provision in the bill providing for the converted entity to act as a development bank. Rather the reference of development bank is being substituted by IDBI Banking Company.

"Suitable provisions should be incorporated in the bill to ensure that the new banking company also continues to be a development bank," it said.

Referring to the huge investment made by public in IDBI, the panel said, "The government should make provisions which will ensure that its shareholding in IDBI does not come below 51 per cent."

Taking into consideration the present financial health of IDBI and the challenges lying ahead, it said, "The management of the new entity should be in efficient hands, which could ensure greater operational transparency and accountability."