Cabinet decision to give Rs 9300 crore as capital to protect IDBI Bank

(PTI) New Delhi, Ta. September 3, 2019, Tuesday

The Cabinet today approved the decision to invest Rs 9300 crore in IDBI Bank. The decision has been taken to improve IDBI Bank's position and make it profitable.

Informing the Cabinet's decision, Information and Broadcasting Minister Prakash Javadekar said that this will help improve the bank's position and it will turn into a profit and the bank will usually be able to provide loans. The government will also have the option to withdraw its stake in the future.

Of the Rs 9300 crore required for the bank, Rs 4743 crore will be withheld by LIC. LIC will invest 51 percent of its capital on IDBI's 51 percent stake. According to the remaining 49 stake, the government will provide Rs 4557 crore to IDBI.

It may be recalled that earlier this year, the government had reduced its stake in IDBI Bank from 86% to 46.46%. In January this year, LIC increased its stake to 51%.

Javadekar said IDBI Bank will be able to raise its own capital after getting Rs 9300 crore capital. The bank will be out of RBI's Prompt Corrective Action (PCA) framework by next year.

IDBI's NPA was 18.8 percent in June last year, which is now down to 8 percent in June 2019. It was worth mentioning that in August last year, the Cabinet allowed LIC to buy 51% of IDBI's stake.

It is worth mentioning that IDBI Bank currently has over 800 branches and has 1.5 million retail customers and has 18000 employees. IDBI Bank reported a loss of Rs 3801 crore in the first quarter of 2018-19, which was completed in June.

IDBI Bank lost Rs 2410 crore in the same period last year. Javadekar said that investing capital in IDBI Bank would not incur any financial burden on the government as it would be provided under a capital recovery bond.