IDBI bank may be one of the first banks to receive the fund infusion from the central government, as part of the Rs 70,000 crore recapitalization of public sector banks announced by the Finance Minister Nirmala Sitharaman. The government has approved fund infusion of Rs 9,300 crore to help turn the bank profitable. Of the Rs 9,300 crore, Life Insurance Corporation of India would meet 51% (Rs 4,743 crore) while the rest will be put in by the government. LIC holds 51% equity in IDBI Bank.
IDBI Bank has been having its share of problems for some time now. The bank has posted a loss of Rs 3,800 crore in the first quarter of this fiscal, ended June 30. This is the 11th consecutive quarter that the bank has posted losses. RBI has brought the bank under its PCA framework last year itself.
IDBI Bank’s NPA, as a ratio of bad loans to the gross advances is 29.12%. This is slightly lower than 30.78% the same first quarter the previous fiscal. The net NPA has definitely recorded a steep decline; from 18.76% to 8%. The bank’s operating profit has been moving downward as well, to Rs 951 crore the last quarter.
S&P Global has put IDBI’s unsecured debts on ‘credit watch negative’ rating. The bank’s shares are trading at just Rs 26.25 apiece now. The share used to be quoted at Rs 56.50 when LIC pumped in Rs 20,000 crore to acquire 51% equity in the bank, just 8 months earlier.
The only positive outcome for LIC out of this IDBI Bank association has been the bank’s efforts at selling its insurance products through its branches.
LIC has been able to grow its business in the recent post with a large array of policies; the insurer offers as many as 32 different products in its portfolio. It is reported that LIC has close to three-quarters of the market in the segments it offers its products.