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IDBI Bank to get Rs 9,300 crores capital support

IDBI Bank to get Rs 9,300 crores capital support
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The government on Tuesday approved Rs 9,300 crore fund infusion in IDBI Bank to help improve the bank's capital base and turn it profitable.

New Delhi: The government on Tuesday approved Rs 9,300 crore fund infusion in IDBI Bank to help improve the bank's capital base and turn it profitable.

Briefing media about Cabinet decisions, Information and Broadcasting Minister Prakash Javadekar said it will help in completing the process of IDBI Bank's turnaround and enable it to return to profitability and normal lending and giving government the option of recovering its investment at an opportune time.

Of the Rs 9,300 crore needed, LIC would meet 51 per cent (Rs 4,743 crore), he said. The remaining 49 per cent, amounting to Rs 4,557 crore, is proposed from the government as its share on one-time basis, he added.

The shareholding of the government was reduced to 46.46 per cent from 86 per cent while LIC stake in the bank increased to 51 per cent in January this year. LIC acquired controlling 51 per cent stake in the bank, making it the lender's majority shareholder in January this year.

After this infusion, IDBI Bank expects to be able to subsequently raise further capital on its own and expects to come out of RBI's Prompt Corrective Action (PCA) framework sometime next year, he said.

"This cash neutral infusion will be through recap bonds i.e. Government infusing capital into the bank and the bank buying the recap bond from Government the same day, with no impact on liquidity or current year's Budget," he said.

IDBI Bank needs a one-time infusion of capital to complete the exercise of dealing with its legacy book, he said, adding it has already substantially cleaned up, reducing net NPA from peak of 18.8 per cent in June 2018 to 8 per cent in June 2019.

The capital for this has to come from its shareholders. LIC is at 51 per cent and is not allowed to go higher by the insurance regulator.

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