The bank has also put its stake in IDBI Federal Life Insurance Company and IDBI Mutual Fund on sale in the next six to eight months as LIC also has a mutual fund
Life Insurance Corporation (LIC) has infused Rs 21,624 crore in IDBI Bank, completing the acquisition of 51% stake in the bank. The capital infusion is expected to wipe out IDBI Bank's losses, helping it exit the prompt corrective action (PCA) by the second quarter of the next fiscal. The bank has now applied to Reserve Bank of India (RBI) to change its name to LIC IDBI Bank.
The bank has also put its stake in IDBI Federal Life Insurance Company and IDBI Mutual Fund on sale in the next six to eight months as LIC also has a mutual fund.
"The capital infusion from LIC will help us come out of the PCA, which we expect by the end of the second quarter. Already on the capital front we have improved and have undertaken some accelerated provisions expecting stress in some of our standard accounts," Rakesh Sharma, managing director and chief executive officer, IDBI Bank, said in a press conference. PCA was restricting the bank from sanctioning any corporate loans.
The Common Equity Tier I (CET) of the bank improved to 9.32% at the end of the December quarter from 6.62% in the year-ago period. CET is the solvency ratio of the bank.
IDBI Bank widened its loss to Rs 4,185.48 crore for the third quarter as bad loans continued to haunt the bank. In the corresponding quarter last year, it had reported a loss of Rs 1,524.31 crore. The gross non-performing assets (NPAs) of the bank were at Rs 55,360.38 crore, about Rs 5,500 crore higher than the year-ago period.
K P Nair, deputy managing director, IDBI Bank, said, "We are controlling our fresh slippages and improving the recoveries."
The bank has set aside Rs 5,000 crore to be sold to asset reconstruction companies. However, the gross NPA and the net NPA ratios improved over the trailing quarter following resolutions in many accounts. Fresh slippages were at Rs 2,211 crore, the lowest during the last seven quarters. IDBI shares ended 5.69% lower, closing at Rs 49.75 on the BSE.
The bank will also have a one-time settlement for all stressed accounts up to Rs 10 crore from which it expects to rake in about Rs 400 crore in the current quarter. It also recovered Rs 3,440 crore during the quarter.
The growth in the advances was led by the retail book, which grew by Rs 6,868 crore or 16% over the previous year to Rs 50,671 crore.
The infrastructure of LIC's wide network and IDBI Bank's 1,800 branches will be shared to cross-sell their products. The bank will also be able to tap LIC's wide distribution network of over 10 lakh agents and also sell the banking products to insurer's one lakh employee base. Salary accounts of all LIC employees will be undertaken by the bank. IDBI Bank will be the primary bank for LIC for extending banking services such as deposit and current facilities.
RECOVERY TIME
- IDBI Bank has applied to RBI to change its name to LIC IDBI Bank. It has also put its stake in IDBI Federal Life Insurance Company and IDBI Mutual Fund on sale in the next six to eight months
- IDBI Bank's loss widened to Rs 4,185.48 crore in Q3. GNPAs were about Rs 5,500 crore higher than a year ago. However, gross NPA and net NPA ratios improved over the trailing quarter
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 "Rakesh Sharma")
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