The bank can not receive money from UltraTech Cement or remit it to its Dubai branch without RBI’s permission
On November 19, the board of directors of UltraTech approved a proposal to incorporate debt-ridden Binani Cement as its wholly-owned subsidiary. UltraTech also promised to pay all of Binani's dues.
The bank cannot receive money from UltraTech Cement or remit it to its Dubai branch without RBI's permission. A delay in the central bank's approval may be because of the way the loan was disbursed -- through IDBI Bank's Dubai branch to a Binani group company in Belgium, the news daily reported.
RBI has reportedly been sending questions to IDBI Bank on the same.
The loan was originally given to 3B-The Fibreglass Co, a Binani group firm in Belgium. Binani Industries, the holding company of the Binani Group, had acquired 3B-The Fibreglass Co in February 2012.
The loan was, however, guaranteed by Binani Cement, which is why IDBI Bank was allowed to recover its loan through the insolvency process, sources told the paper.
"We need RBI permission to remit the money to the Dubai branch where the loan was given in euros," a source was quoted as saying. RBI's approval may depend on whether the central bank is satisfied with IDBI Bank's reply, the source said.
Moneycontrol could not independently verify the report.
Senior IDBI Bank officials are planning to meet RBI Deputy Governor BP Kanungo to clarify its position on the transfer of funds. "This money would substantially aid our recovery efforts," another source told the paper.
Cash-strapped IDBI Bank has non-performing assets (NPAs) worth Rs 60,875 crore, which is 32 percent of total loans. The bank's total capital adequacy ratio has slipped below the regulatory requirement (9 percent) to 6.22 percent as on September 30, 2018.
The bank, which is under the RBI’s prompt corrective action (PCA) framework, is hoping that fresh capital from LIC will hasten the process of cleaning up its books.
The Insurance Regulatory and Development Authority of India (IRDAI) in June had permitted LIC to increase its stake in IDBI Bank from 8 percent to 51 percent.In August, the Cabinet had approved an acquisition of controlling stake in the bank by LIC as a promoter through preferential allotment/open offer of shares, and relinquishment of management control by the government in the bank.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.