Shot­gun mar­riage

The co­erced takeover of the pub­licly owned IDBI Bank by LIC, the coun­try’s largest in­surer, will nei­ther pro­tect the in­ter­ests of the be­lea­guered bank nor fur­ther the in­ter­ests of the in­surer or its pol­i­cy­hold­ers.

FrontLine - - FINANCIAL SECTOR - BY

MAR­RIAGES may be made in heaven, but the hastily ar­ranged one be­tween IDBI Bank Ltd and the Life In­sur­ance Cor­po­ra­tion of In­dia (LIC), the coun­try’s big­gest in­sur­ance com­pany, has all the trap­pings of a hus­tled wed­ding com­man­deered by a khap pan­chayat in the bad­lands of north­ern In­dia.

The Union gov­ern­ment’s re­cent de­ci­sion to al­low the pub­licly owned LIC to take a 51 per cent stake in IDBI Bank with­out giv­ing the in­surer the priv­i­lege of en­joy­ing the man­age­rial con­trol that ma­jor­ity own­er­ship nor­mally confers sig­nals a trav­esty of the rules of con­duct that cap­i­tal­ism swears by. In ef­fect, one is asked to be­lieve that LIC is only “in­vest­ing” in the bank with­out tak­ing the long-range view that own­er­ship, es­pe­cially of a bank, de­mands. In the process, the gov­ern­ment ap­pears to have started rolling out the first case of the pri­vati­sa­tion of a public sec­tor bank (PSB). That the means the gov­ern­ment has adopted threaten not only the public pres­ence in bank­ing but also the in­ter­ests of the gi­ant in In­dian in­sur­ance and its mil­lions of pol­i­cy­hold­ers is just in­ci­den­tal to the cyn­i­cal game that is pri­vati­sa­tion.

Once upon a time, since 1964 to be pre­cise, what we now know as IDBI Bank was born as the In­dus­trial De­vel­op­ment Bank of In­dia, a sub­sidiary of the Re­serve Bank of In-

V. SRIDHAR

IDBI TOW­ERS, the bank’s head of­fice, in Mum­bai. A file pic­ture.

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