IDBI Bank crafts turnaround plan

IDBI Bank has announced that it has crafted a comprehensive turnaround strategy, which includes restricting corporate loan book growth, raising additional capital and non core asset sales to reduce operational costs.

Aggressive recovery and prevention of further slippages is a priority area for IDBI Bank. Given the stress in the corporate sector, the bank will restrict growth in the corporate loan book and focus on increasing retail and priority sector asset base. This will help the bank reduce risk weighted assets and improve capital adequacy ratio (CAR) in the short term, the bank said.

IDBI Bank has reported a net loss of Rs 3,200 crore for the quarter ended March 31, 2017, compared with a loss of Rs 1,736 crore in the same period last year. The bank’s gross non performing assets (NPAs) nearly doubled for the quarter to R 44,752 crore (21.25% of total loans) compared with Rs 24,875 crore (10.98% of total loans) in the Q4FY16 and Rs 35,245 crore (15.16% of total loans) in the sequential quarter (Q3FY17 of total loans).

The bank is also planning to raise additional capital in the medium term. It has received a capital infusion of Rs 1,900 crore through the government’s  subscription to its preferential share allotment earlier this year, which enhanced its Common Equity Tier 1 Capital. Furthermore, Life Insurance Corporation of India has also subscribed to the bank’s preferential equity issue, IDBI Bank said.
 
“Additionally, CAR would be improved through sale of non-core assets, continued support from the government of India and churning of corporate loan book to reduce risk weight of the portfolio. The bank will look at reducing its operational cost and sell non-core assets over a period of time. The exact schedule and quantum of such a sale will depend on market conditions and the bank has already initiated the process,” IDBI Bank said.