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IDBI Bank to seek exit from prompt corrective action

IDBI Bank narrowed its losses to Rs 4,918 crore in the fourth quarter from Rs 5,662 crore a year ago

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Rakesh Sharma
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IDBI Bank is planning to approach Reserve Bank of India (RBI) to request it for exit from the prompt corrective action (PCA) framework after it narrowed losses and brought down non-performing assets (NPAs) though recoveries, write-offs and sale to asset reconstruction companies. 

The bank’s gross NPAs declined year on year to Rs 50,027 crore, which is about 27.47% of its advances It had reported gross NPAs of Rs 55,588 crore, about 27.95% of its advances, in the corresponding period in fiscal 2017-18. Most of the bad loans are from the infrastructure segment. During the quarter the bank narrowed its losses to Rs 4,918 crore, partly helped by a fall in provisions for bad loans. It had posted a net loss of Rs 5,662 crore in the fourth quarter of the last fiscal.

IDBI Bank also revealed it had under-reported its non-performing assets by Rs 4,252.21 crore for 2018-19. This resulted in its losses for 2018-19 going up to Rs 12,268 crore from Rs 8,237.20 crore a year ago. The RBI inspection for 2018-19 had revealed the divergence, and the bank has made a provision of Rs 4,030 crore after the audit. The bank’s stock closed at Rs 37.95 per share, 2.57% higher than the previous close, on BSE.

GREEN SHOOTS

  • IDBI Bank narrowed its losses to Rs 4,918 crore in the fourth quarter from Rs 5,662 crore a year ago
     
  • IDBI Bank under-reported its non-performing assets by Rs 4,252.21 crore for 2018-19

Rakesh Sharma, managing director and chief executive, said, “The bank is working towards bringing its net NPAs below 6% by September 2019 and a recovery of Rs 13,000 crore during the current fiscal. Most of our NPAs are  legacy issues.”

The bank may exit PCA at the end of this financial year after reporting profits, he said. The bank is planning to raise Rs 8,000 crore of fresh capital from the equity market and the sale of its insurance and mutual fund businesses.

LIC completed the acquisition of 51% controlling stake in IDBI Bank in January 2019, infusing Rs 21,624 crore in the lender. Since LIC has a mutual fund and is the largest insurance company IDBI will put its subsidiary IDBI Mutual Fund and its insurance unit IDBI Federal Life Insurance on sale.

“Regarding the mutual fund (stake sale), we have already come out with an advertisement and the transaction advisor has already asked for the expression of interest. There is a regulatory restriction of completing the entire transaction by January 2020. It should happen in the next four-five months. Regarding IDBI Federal Life Insurance also, we had initiated the process earlier, but it was kept on hold when LIC came on board. We have discussed with the other shareholders and the process has been re-initiated,” Gurudeo Yadwadkar, deputy MD of IDBI Bank, said.

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