IDBI Bank,
the lender with India’s worst bad-loan ratio, is seeking to curtail its
soured debt by selling Rs 100 billion ($1.4 billion) of stressed assets
and stepping up efforts to recover dues from delinquent borrowers.
“We have set up a war room to focus on recovering the non-performing
loans while another team is keeping a check on loans showing early
signs of stress,” Chief Executive Officer Rakesh Sharma said by phone.
The lender wants to sell stressed loans “by June-end to quicken the pace
of clean-up exercise”.
Burdened with the world’s worst bad-loan ratio, Indian lenders are
stepping up efforts to recover delinquent debt after the Reserve Bank of
India announced tougher rules. The Mumbai-based lender’s turnaround
efforts gathered pace after Life Insurance Corporation of India, the
nation’s largest insurer, bought a controlling stake from Prime Minister Narendra Modi’s government.
The insurer has infused more than Rs 210 billion into IDBI to
bolster its risk buffers and bring it out of the regulator’s emergency
programme that restricts lending.
IDBI Bank
will emerge from the Reserve Bank’s prompt corrective action framework
by September as the bad-loan ratio narrows and profits rise, Sharma
said. Banks sanctioned by the regulator are restricted from lending and
expanding their network while they mend their balance sheets. IDBI’s
gross bad-loan ratio stood at about 30 per cent as of December 31, an
exchange filing shows.
The lender is also planning to raise about Rs 10 billion by selling
its holding in National Stock Exchange and National Stock Depository
over the next month, the chief executive said on Sunday. According to
Sharma, the bank will also complete the sale of its insurance and mutual
fund units in 2019.
Shares of IDBI Bank rose 4 per cent at 11 a.m. in Mumbai trading. It
was the best performer on the 12-stock Nifty PSU Bank Index, which
gained 2.6 per cent.
Sharma also shared his views on the Iran payments business and
capital raising. Comments in the following Q&A have been edited and
condensed:
Will IDBI consider raising capital this year?
The bank will raise tier I and tier II capital in 2019. We will tap
the public market to raise these funds and LIC will participate in that
round to retain their majority stake in the bank. We would be coming
into the market around September after our profit trajectory improves.
Why is IDBI getting into the Iran oil payments business?
Indian refiners’ payments for Iranian oil shipments were earlier
handled solely by Uco Bank. Now, the government has allowed IDBI Bank
also to route these payments. We are working out the processes and by
March-end, we should start processing these payments. As refiners are
required to deposit any money destined for Iran without interest with
us, the bank’s cost of funds and borrowings will come down.
Source- Economic Times
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