IDBI Bank to become LIC IDBI Bank or LIC Bank
05 February 2019
Insurance giant Life Insurance Corporation of India (LIC) has entered the banking arena last month by purchasing 51 per cent stake in state-owned IDBI Bank. Subsequently, a proposal has been made to change the name of the PSU bank to either LIC IDBI Bank or LIC Bank.
The IDBI board has finally approved the proposal to change the bank’s name, subject to RBI clearance.
“The change of name would be subject to RBI’s no objection, name availability or reservation by ministry of corporate affairs (MCA), shareholders’ approval through postal ballot,” IDBI stated in an exchange filing on Monday.
The entry of the more than 60-year-old state-owned insurer into the banking space is not as per financial sector regulations, but was forced by circumstances. However, LIC will have to reduce its stake to around 15 per cent over a period of time to meet banking and insurance regulations.
The insurance regulator IRDA will set the timeline for LIC to bring down its stake in IDBI Bank Ltd to below 15 per cent after studying the insurer’s business plan for the troubled lender. The timeline has yet to be decided, the bank stated on Monday.
“That is yet to be fixed. The condition that has been put is eventually they will have to bring their stake down (below 15 per cent),” PTI quoted Insurance Regulatory and Development Authority of India chairman Subhash Khuntia as saying. “How much time that will be, looking at their business plan and...we will decide."
IDBI Bank has been plagued by bad loans and huge losses. The state-owned lender reported losses to the tune of Rs4,185 crore in Q3FY19. The bank has been reporting huge losses for nine straight quarters.
“The aim is that in the future there are no negative surprises on provisioning. But LIC, with their ample capital, can provide any future capital needed by way of preference shares. That option is open for us," said KP Nair, deputy managing director of IDBI Bank.
“We have already seen some funds being recovered through the NCLT route in the December quarter. We are expecting another Rs4,500 crore to be recovered through the insolvency route by March and an additional Rs10,000-12,000 crore through the next financial year. We are also implementing special resolution and recovery schemes for medium and small borrowers. This will help us bring down our net NPA ratio to below 12 per cent by March and further below 6%by the second quarter next year,” said Rakesh Sharma, MD & CEO of IDBI Bank.