M Saraswathy Moneycontrol News
IDBI Bank may be pinning hope on additional capital infusion from new promoter Life Insurance Corporation of India (LIC) to help spruce up its books. But the country’s largest insurer, which has already infused about Rs 14,500 crore in December 2018 into the entity, is likely to go slow on further investment.
"While an additional capital has been sought, another big chunk may not be payable on an immediate basis," an official told Moneycontrol.
Sources said that IDBI Bank is seeking Rs 9,000 crore to 10,000 crore on an immediate basis from the life insurer.
But LIC is seeing a flat growth in its new premium collection, and may not immediately dip into its reserve like the last time when the capital for the IDBI Bank stake purchase came from the policyholder funds.
LIC did not respond to a query sent by Moneycontrol.
According to the public disclosures of LIC, the life insurer had a policyholder account assets of Rs 27.7 lakh crore as of December 31, 2018. As per the public disclosures of LIC, their gross non-performing assets (NPAs) in the debt portfolio stood at 6.06 percent for 9MFY19 compared to 5.74 percent in the year-ago period.
Insurance Regulatory and Development Authority of India (IRDAI) had in June 2018 made an exception when it allowed LIC to hold 51 percent in IDBI Bank. Insurance regulations state an insurer can hold only 15 percent equity stake in an entity to ensure there is no concentration of risks. LIC had in January 2019 completed the deal with IDBI Bank.
IDBI Bank has been facing losses in its books due to a rise in provisions. For Q3, the bank saw a three-fold increase in its loss to Rs 4,185 crore due to higher provisions.
While their gross NPAs as a percentage of total assets declined to 29.67 percent in Q3 against 31.78 percent in Q2FY19 and net NPAs also dropped to 14.01 percent against 17.30 percent sequentially.
The turnaround of IDBI Bank has been a key factor for getting LIC on board as the majority shareholder in the entity. This was after LIC expressed interest to enter the banking sector and had approached the Ministry of Finance with a proposal to hold a majority stake in the bank.
On the other hand, IRDAI approval for the LIC-IDBI Bank deal was on the condition that the life insurer would eventually bring down in the entity to 15 percent.
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