Credit Score: IDBI Bank Set to Get .₹ 3,000cr Bailout Pack­age

Cap­i­tal in­fu­sion to help main­tain a healthy cap­i­tal-ad­e­quacy ra­tio & pur­sue credit growth

The Economic Times - - Economy: Macro, Micro & More - Dheeraj.Ti­wari @times­group.com

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.

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