BANKING News: Govt chips in Rs
4,557 cr in IDBI Bank to boost CAR
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| BANKING NEWS |
The Union
Cabinet, chaired by Prime Minister Narendra Modi, on Tuesday, approved a capital
infusion of Rs 4,557 crore by the government in the IDBI Bank.
The government's contribution was limited to its shareholding because LIC, which already holds
51 percent stake in the bank, cannot breach the limit as per the norms of
insurance regulator, requiring the government to chip in its share of capital
infusion. "The capital for this has to come from its shareholders. LIC is
at 51 percent and is not allowed to go higher by the insurance regulator. Of
the Rs 9,300 crore needed, LIC would meet 51 percent (Rs 4,743 crore).
Remaining 49 percent, amounting to Rs 4,557 crore, is proposed from the
government as its share on a one-time basis," Union Environment, Forests and
Climate Change Minister Prakash Javadekar said at the media briefing on cabinet
decisions.
"It will
help in completing the process of IDBI Bank's turnaround and enable it to
return to profitability and normal lending, and giving the government the option
of recovering its investment at an opportune time," he said. Javadekar
also said the capital infusion is for meeting the capital adequacy ratio of
IDBI Bank. While announcing the bank merger plan recently, the government said
Rs 55,250 crore capital would be infused into the merging banks and also the
Bank of Baroda. But the IDBI Bank did not figure in the list. Out of the Rs
55,250 crore upfront capital for credit growth and regulatory compliance to
support economy, the PNB will get Rs 16,000 crore, the Union Bank Rs 11,700
crore, the Canara Bank Rs 6,500 crore, the Indian Overseas Bank Rs 3,800 crore,
the Central Bank of India Rs 3,300 crore, the Bank of Baroda Rs 7,000 crore,
the Indian Bank Rs 2,500 crore and the Uco Bank Rs 2,100 crore. Following Cabinet's
approval in August 2018, LIC acquired 51 percent stake in IDBI Bank.
Bank of India
Rs 3300 crore the Bank of The government continues to be a promoter and holds
46.46 percent stake. Javadekar said the financial parameters of IDBI Bank have
improved considerably during the last one year. CRAR has improved from 6.22 percent as on September 30, 2018, to 11.58 percent as on March 31, 2019. Net NPA
ratio reduced from 17.3 percent as on September 30, 2018, to 10.11 percent as
on March 31, 2019, and further to 8.02 percent as of June 30, 2019. Provision
Coverage Ratio (PCR) improved from 69 percent (September 30, 2018) to 83 percent (March 31, 2019) and further to 88 percent on June 30, 2019. Synergy with
the LIC has enabled access to 29 crore policy-holders base spread over 3,184
branches and also to 11 lakh agents and 2 lakh employees of the LIC. Rs 500
crore revenue for FY 2020 and Rs 1,000 crore from FY 2021 onwards is projected
from the synergy.
Sale of
insurance kick-started in March 2019 with Rs 160 crore in premiums. This
momentum has continued with over Rs 250 crore premium collection in the first four
and a half months of this year. FY 2019-20 target is Rs 2,000 crore of premiums
and Rs 200 crore revenue. Additional business anticipated is Rs 5,000 crore
(Housing loan, Auto loan, personal loan) by leveraging LIC agents' network,
according to the official statement.
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