Credit Score: IDBI Bank Set to Get .₹ 3,000cr Bailout Package
Capital infusion to help maintain a healthy capital-adequacy ratio & pursue credit growth
New Delhi: The government is all set to bail out IDBI Bank with a .₹ 3,000-crore capital infusion to help it maintain a healthy capital-adequacy ratio and pursue credit growth. The government has already said it is still open to bring down its stake in the bank to below 50%.
“There are projections that in the last quarter of this fiscal there will be a jump in bad loans for IDBI. We are behind the bank and the amount allocated will help maintain stability,” said a senior finance ministry official.
Other state-run banks will also require immediate capital support, the finance ministry reckons. “About seven state-run banks have reported net profit over the past three quarters. There has also been substantial improvement in recoveries done by some lenders, including Indian Overseas Bank,” he said. On the other hand, IDBI Bank’s lending portfolio is mostly in corporate segment and that is one of the major reasons for surge in its bad loans.
IDBI reported a net loss of .₹ 2,255 crore in December quarter against .₹ 2,184 crore in the year-ago period. Gross non-performing assets (GNPAs) rose to .₹ 35,245 crore at December-end 2016 from .₹ 30,134 crore in the previous quarter. The current Tier-I capital stands at 8.53%. Last week, the bank informed the stock exchanges that its board of directors had approved in-principle a proposal to divest some of its non-core investments. The bank is expected to raise around .₹ 5,000 crore thro- ugh such stake sale.
“Any capital from additional resources is welcome,” the finance ministry official said, adding that there is no cap on lending by the bank. The bank holds stake in IDBI Federal Life Insurance, IDBI Capital Market Services and NSE, among others.
ET had earlier reported that the finance ministry is looking to rework its strategy on stake sale in IDBI Bank, which also involves valuation of its real estate assets. The government has budgeted .₹ 25,000 crore towards bank capitalisation this fiscal, of which it has allocated .₹ 22,915 crore. “We have already given 75% of the sum allocated, and about .₹ 8,000 crore is remaining, which will be allocated based on the last quarter financials,” said the finance ministry official. In his budget speech, FM Arun Jaitley announced .₹ 10,000 crore towards capital infusion for 2017-18. This is the last installment under the seven-pronged revamp plan dubbed Indra Dhanush announced in 2015, where .₹ 70,000 crore was allocated towards bank capitalisation plan over four years.