Having claimed the dubious distinction of featuring among the worst ranked banks in India, the IDBI Bank now has a new owner - one with deep pockets.
The behemoth Life Insurance Corporation of India is now the new promoter for this bank whose NPAs are among the highest in the country. LIC's entry does address the capital issue but there are bigger problems to sort out.
First, higher provisioning, and faster recovery to clean up the NPA mess. The bank needs to sell its non-core assets to generate additional capital while it focuses on the banking business. Whatever the entity's new name, the LIC-IDBI Bank will have to drastically reduce its reliance on infrastructure and other corporate assets, scale up its retail advances from the existing 43 per cent, and improve its share of low-cost deposits from the existing 37 per cent.
There is indeed renewed hope after LIC entered this picture but if this bank - the tenth largest in total asset terms - fails to exploit the opportunity, other options like bringing in a strategic investor(s) or a merger with other PSBs will be back on the bargaining block.
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