idbi bank: LIC-IDBI Bank Agreement: Money will not be enough; add vision and strategy to the mix

MUMBAI / KOLKATA: Bank IDBI Bank, which earned $ 9 billion in equity from Life Insurance Corp in India, could be a lifesaver for the lender, but to regain its past glory, B Sriram needs from a new vision. more like his new CEO.

For a bank that is stuck with more than a quarter of loans as bad debts and not very present, a new strategy on how to go through the digital revolution and change the landscape of business loans are the essential solutions.

"The speed with which it was accomplished is remarkable," said Ashvin Parekh, an independent industrial badyst and former consultant at EY.

"Between insured and shareholders of IDBI Bank, no one should benefit at the expense of the other." There is no proposal like how LIC will get the bank out of the bank. Rickety There will be constraints When it comes to technical details related to the bank, we have to see if they have the bandwidth. "

Capital alone is not enough for IDBI Bank. Over the past decade, IDBI Bank has received $ 22,884 million in government funding from ICRA salons. Even last year, he received 12,471 billion crore of capital. IDBI Bank has been transformed into a universal lender as a term lending institution specializing in project financing at the time of pre-liberalization, when the country faced a huge capital shortfall . Even though she changed her stripes, she was unable to cope with the challenges and competition.

The stressed badets of IDBI Bank come from the state, far more than any other bank. If past capital investments have not helped much, it is doubtful that only LIC's investment can pull the bank out of the crisis.

"If the bank's takeover occurs in the next 4-6 quarters, then the insured will benefit, otherwise the money will go down the drain.LIC will have to provide more capital over the next quarters" said Parekh.

IDBI's stressed badets are at 27.95% of the total, the highest among all banks. Its capital adequacy is 10.70%. He has not made a profit in the past three years.

"LIC will now have a higher representation in the IDBI table.Therefore, there will be a new thinking that should help IDBI in the long run.This is the first step of relaunching banks by the government, "said Sanjeev Jain, an badyst at Ashika Stock Broking. "Shareholders should see IDBI Bank as a long-term bet."

While his immediate rival ICICI managed to become a wholly owned retail bank under the leadership of KV Kamath, government property continued and the diktat of New Delhi limited IDBI Bank's operations.

But given his precarious financial situation, it would be difficult to reduce the checks of thousands of crores for a single project and to remain seated. With most banks withdrawing project loans, the glory days of IDBI Bank may be late.

In addition, large companies such as Reliance Industries and Hindalco Industries are changing their financing profile by accessing bond markets more often, which gives them a better price than a bank loan.

IDBI Bank is facing challenges in its traditional stronghold.