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Mumbai, May 28 () The Reserve Bank on Thursday said it has imposed a penalty of Rs 5 crore on state-owned Bank of India for non-compliance with certain provisions, including those related with NPA. The central bank also imposed a penalty of Rs 1.2 crore on Karnataka Bank for non-compliance with NPA norms. In a statement, RBI said it has imposed a monetary penalty of Rs 5 crore on Bank of India (BoI) for non-compliance with "certain provisions of the directions issued by RBI on 'Income Recognition, Asset Classification and Provisioning pertaining to Advances - Divergence in NPA accounts', 'Opening of current accounts by banks – Need for discipline', and 'Classification and reporting of frauds'". Giving details, it said the statutory inspection of BoI with reference to its financial position as on March 31, 2017 and March 2018 and the risk assessment reports pertaining thereto revealed, inter-alia, non-compliance with the certain directions. A notice was issued to the bank in this regard. After considering the bank's reply to the notice, oral submissions made during the personal hearing and examination of additional submissions, RBI concluded that the charges of non-compliance with RBI directions warranted imposition of monetary penalty. The penalty on Karnataka Bank has been imposed for non-compliance with certain provisions of directions on 'Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances - Divergence in NPA Accounts' and 'Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances'. RBI also imposed a penalty of Rs 30 lakh on Saraswat Co-operative Bank for non-compliance with directions on 'Income Recognition and Asset Classification (IRAC) norms.' In all three cases, action is based on the deficiencies in regulatory compliance, and is not intended to pronounce upon the validity of any transaction or agreement entered into by them with customers, RBI said. NKD RVK

RBI imposes penalty on Bank of India, Karnataka Bank

New Delhi, Nov 19 () Central Bank of India has reported an increased net loss of Rs 6,430.48 crore for 2018-19 due to NPA divergence after assessment of higher bad loans by the Reserve Bank.
 The net NPA divergence -- the difference between the NPAs reported by the bank and that assessed by the RBI -- was at Rs 2,565 crore for 2018-19.
 Central Bank of India had reported a net loss of Rs 5,641.48 crore in 2018-19 earlier.
 "The adjusted (notional) net profit after tax for the year ended March 31, 2019 after taking into account the divergence in provisioning is (-) Rs 6,430.48 crore," the bank said in a regulatory filing.
 Banks are required to report divergences in their asset classification and provisioning as per Sebi guidelines issued on October 31, 2019.
 The bank had reported Rs 11,333.24 crore net NPAs during the year while the RBI assessed it at Rs 13,898.24 crore, leaving a gap of Rs 2,565 crore.
 The divergence in provisioning also increased by Rs 788 crore for the fiscal ended March 2019.
 Market regulator Sebi has put in place tighter disclosure norms, directing all listed banks to disclose any divergence in bad loan provisioning within 24 hours of receiving RBI's risk assessment report, rather than waiting to publish the details in their annual financial statements.
 Banks, including Indian Bank, Union Bank of India, Bank of India, Indian Overseas Bank and Lakshmi Vilas Bank, have already reported their NPA divergences for the last fiscal.
 The disclosures need to be made in case the banks' additional provisioning for non-performing assets (NPAs) assessed by the RBI exceeds 10 per cent of the reported profit before provisions and contingencies, and if the additional gross NPAs identified by the RBI exceed 15 per cent of the published incremental gross NPAs. KPM MR

Central Bank of India reports higher Rs 6,430cr loss for FY19 due to NPA divergence

New Delhi, Dec 22 () LIC-controlled IDBI Bank expected to come out of the Prompt Corrective Action (PCA) framework in the last quarter of the current fiscal with the support of capital infusion and recovery from large IBC cases.
According to sources, some of the restrictions with regard to lending by the bank have been eased recently.
With money coming from resolution on Essar Steel and expected flow from resolution of Bhushan Power and Steel and Alok Industries, sources said the bank is likely to be posting profit during the third quarter and the subsequent quarter.
The bank has already come below net NPA threshold of 6 per cent, one of the three parameters for triggering PCA framework. The net NPA of the bank reduced to below 6 per cent in the second quarter ended September 2019.
Recently, Parliament approved Rs 9,300 crore capital infusion in IDBI Bank. The department of financial services got an additional Rs 4,557 crore for infusion into IDBI Bank through recap bonds for their share of 47.11 per cent in IDBI Bank. State-owned LIC, which is the promoter of the debt-ridden lender with 51 per cent stake, will pump in an additional Rs 4,743 crore to improve the bank's capital position.
Wtih this kind of capital infusion coupled with write back from the recoveries from large NPA cases, the bank is expected to come out from the weak bank watch list by the end of the current fiscal, sources said.
The PCA framework kicks in when banks breach any of the three key regulatory trigger points namely capital to risk weighted assets ratio, net non-performing assets (NPA) and return on assets (RoA).
Earlier this month, Finance Minister Nirmala Sitharam said the recapitalisation was done by the government by infusing Rs 21,157 crore into IDBI Bank since 2015 after we came back to power and LIC infused Rs 21,624 crore.
"So both put together have given Rs 42,781 crore to the bank. This has help reduce the net NPAs from a peak of 17.3 per cent in September, 2018 to 5.97 per cent in September, 2019. It has come below RBI's 6 per cent net NPA threshold level," she had said.
Earlier this year, the RBI removed five banks - Bank of India, Bank of Maharashtra, Oriental Bank of Commerce, Allahabad Bank and Corporation Bank - from the PCA framework in two phases after capital support from the government that resulted in improvement in their financial parameters.
The capital infusion helped these lenders meet requisite capital thresholds and reduced their net NPA levels to below 6 per cent. DP MKJ

IDBI Bank likely to be out of PCA framework in fourth quarter

<ul><li>On September 17th, Finance Minister <keyword id="42575" type="PERSON" weightage="20" keywordseo="Arun-Jaitley">Arun Jaitley</keyword> proposed the consolidation of <keyword id="6358007" type="DOMAIN" weightage="20" keywordseo="bank-of-baroda">Bank of Baroda</keyword> (BoB), <keyword id="6368859" type="DOMAIN" weightage="20" keywordseo="vijaya-bank">Vijaya Bank</keyword> and <keyword id="363392" type="DOMAIN" weightage="20" keywordseo="Dena">Dena</keyword> Bank.</li><li>The merged entity will become the third-largest bank in India and have nearly 9,500 branches.</li><li>Given its status as the weakest bank, Dena Bank is expected to benefit the most of the <keyword id="42411" type="PERSON" weightage="20" keywordseo="Merger">merger</keyword>. Its NPA ratio is more than double that of the other two banks. </li></ul> The problems plaguing India’s public sector banks are well known. In addition to poor governance, their balance sheets are disproportionately burdened with bad loans when compared to their private sector counterparts. The smaller, weaker ones are unable to compete in a crowded market and require fresh infusions of capital. The Modi administration’s approach to the problem has been to merge small state-owned banks with their larger peers. In early 2017, plans for <keyword id="6354731" type="DOMAIN" weightage="20" keywordseo="state-bank-of-india">State Bank of India</keyword> (SBI), India’s largest bank, to absorb five associate banks got underway. And now, 18 months hence, the Indian government is planning another merger. On September 17th, Finance Minister Arun Jaitley proposed the consolidation of two relatively well-capitalised banks - Bank of Baroda (BoB), Vijaya Bank - with Dena Bank, a struggling lender faced with credit limits as a result of being placed on the RBI’s Prompt Corrective Action (PCA) framework. The merged entity will become the third-largest bank in India and have nearly 9,500 branches. Bank of Baroda is the largest of the bunch with ₹10.3 trillion of total business, while Vijaya and Dena have ₹2.8 trillion and ₹1.8 trillion of business, respectively. Dena to benefit the most Given its status as the weakest bank, Dena Bank is expected to benefit the most of the merger. It has a <keyword id="463915" type="PERSON" weightage="20" keywordseo="non-performing-asset">non-performing asset</keyword> (NPA) ratio of a little over 11% - which means that 11% of all the entries in its loan book have gone bad - while BoB and Vijaya have a NPA ratio of 5.4% and 4.1%, respectively. Once merged, the bank will have a combined NPA ratio of 5.7%. Jaitley said that the government was making a conscious decision not to merge the operations of weak lenders. Rather, the merger of two strong banks and one weak bank seemed to be a more viable option, keeping in the mind the long-term sustainability of the merged entity and the potential for expansion. Bank of Baroda has a considerable national footprint, while both Dena and Vijaya have a strong presence in their respective regions of Maharashtra and Karnataka, especially in the small-and-medium enterprises (SME) segment. While bankers have lauded the move, the success of the consolidation strategy isn’t guaranteed yet. SBI has seen its performance decline following the merger with the associate banks. However, while the adjustment and integration process may prove a drag in the short term, the three banks mentioned above all have strengths that can be capitalised upon and overlapping cost centres that can be excised. Now what? The respective boards of each bank will now vote on the merger and if approved, will commence preparations on a plan for the amalgamation of the three entities and decide on a share-swap ratio. The merger plan will then need to be approved by the Indian Parliament. Since the government is a majority owner in all three banks, it seems more likely than not that the merger will be approved. The entire process is expected to take six months. Once the merger is completed, there will be only nine public-sector banks left on the PCA watchlist.

India’s government is merging three state-owned lenders to create one of the country’s largest banks

Mumbai, Apr 17 () The reduction in reverse repo rate by 25 basis points to 3.75 per cent by the Reserve Bank is a significant step but it is important that banks should increase their risk appetite, say economists and analysts. The Reserve Bank of India on Friday announced a 25 basis points reduction in reverse repo to 3.75 per cent from 4 per cent in order to encourage banks to deploy these surplus funds in investments and loans in productive sectors of the economy. "The reduction of reverse repo is significant but it needs to be seen if the flow to the private sector actually increases," Care Ratings Chief Economist Madan Sabnavis said. DBS Bank India Economist Radhika Rao said the reduction in the reverse repo rate is meant to prod banks to consider lending activity rather than park funds with the central bank. "Given the still sizeable funds that is being parked with the central bank under the reverse repo operations even after the 90 basis points cut in March, points to the limited credit and risk appetite of financial institutions," Rao said, while cautioning that a further reduction might disincentives banks to utilise the reverse repo window. SBI's Group Chief Economic Advisor Soumya Kanti Ghosh said the RBI has excluded the accounts availing moratorium from the 90-day NPA norm, thus providing a breather to banks as well as customers. "However, given the working capital challenges it is advisable for the RBI now to relook at the 90-day norm," he said. Ghosh said once an account is classified NPA, the borrower will not be able to raise funds from any other lender. "In the current circumstances the only way to save the economy and the financial system seems to be a relaxation of the IRAC norms i.e extending the 90-day schedule to 180 days," he said. Ghosh, however, said this relaxation should be given along with a well laid out calendar of returning to the current norm of 90 days in the next two years, by which time hopefully the Covid-19 crisis would have subsided. RBI also announced targeted long-term repo operations (TLTRO 2.0) for an aggregate amount of Rs 50,000 crore, to begin with, in tranches of appropriate sizes. The funds availed under this will have to be invested in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs, with at least 50 per cent of the total amount availed going to small and midsized NBFCs and MFIs. KPMG India Partner and Head (CFO Advisory) Sai Venkateshwaran said "the TLTRO 2.0 for a total of Rs 50,000 crores, will provide some of the much needed liquidity for NBFCs, that have been faced with a significant ALM mismatch as they haven't benefited from the grant of moratorium announced by RBI earlier." RBI also announced providing special refinance facilities for a total amount of Rs 50,000 crore to Nabard, Sidbi and NHB to enable them to meet sectoral credit needs. Crisil Ratings Senior Director Krishnan Sitaraman said the twin funding measures announced by RBI will definitely provide some relief to NBFCs / HFCs / MFIs who have been providing moratorium on their loans to borrowers but were facing uncertainty in obtaining moratorium on their bank loans. "At the same time the fact that no formal announcement was made on applicability of bank loan moratorium to NBFCs would be a dampener for them," he said. According to EY India's Economist and Chief Policy Advisor D K Srivastava, the two measures -- reduction in reverse repo and increase in the state governments' WMA limits by 60 per cent of the original limit -- would facilitate increase in economic activities as the lockdown is progressively eased. RBI further said in respect of all accounts for which lending institutions decide to grant moratorium or deferment, and which were standard as on March 1, 2020, the 90-day NPA norm shall exclude the moratorium period, that is there would be an asset classification standstill for all such accounts from March 1, 2020 to May 31, 2020. "With the objective of ensuring that banks maintain sufficient buffers and remain adequately provisioned to meet future challenges, they will have to maintain higher provision of 10 per cent on all such accounts under the standstill, spread over two quarters, i.e., March, 2020 and June, 2020," RBI said. According to Icra Ratings Senior Vice President and Group Head (financial sector) Karthik Srinivasan, the proposal for 10 per cent provisions on the accounts under the standstill on asset classification because of moratorium is likely to significantly increase the credit provisions for the banks. "With an estimate of 3-4 per cent of the bank credit being in overdue category, i.e. SMA 1 and SMA2, which currently requires provision of only 0.4 per cent, the provisioning requirements of banks can increase by Rs 300-400 billion because of the proposed regulations," he said. Deloitte India's Economist Rumki Majumdar said the ability to grant relaxed NPA classification to borrowers and excluding NPA classification from the moratorium period will encourage NBFCs to lend to MSMEs without worrying about the impact such lending may have on their NPAs, which have been high. According to Covestro India's Head of Finance Avinash Bagdi, the bold steps taken by RBI to ensure smooth functioning of banks and financial institutions will help the country to prevent the economic slowdown curve from steepening. HV ABMABM

RBI's reverse repo cut significant, but banks need to increase risk appetite: Economists

New Delhi, May 9 () Three promoters of Ram Dev International, recently booked by the CBI for allegedly cheating a consortium of six banks to the tune of Rs 411 crore, have already fled the country before the State Bank of India reached the agency with the complaint, officials said on Saturday.The CBI had recently booked the company engaged in export of Basmati rice to the West Asian and European countries and its directors Naresh Kumar, Suresh Kumar and Sangita on the basis of complaint from the State Bank of India (SBI), which suffered the loss of more than Rs 173 crore, they said. The company had three rice milling plants, besides eight sorting and grading units in Karnal district with offices in Saudi Arabia and Dubai for trading purposes, the SBI complaint said.Besides SBI, other members of consortium are Canara Bank, Union Bank of India, IDBI, Central Bank of India and Corporation Bank, they said. The Central Bureau of Investigation (CBI) did not carry out any searches in the matter because of the coronavirus-induced lockdown, the officials said.The agency will start the process of summoning the accused, incase they do not join the investigation, appropriate legal action will be initiated, they said.According to the complaint filed by SBI, the account had become non-performing asset (NPA) on January 27, 2016.The banks conducted a joint inspection of properties in August and October, nearly 7-9 months later only to find Haryana Police security guards deployed there, they said."On inquiry, it has been come to notice that borrowers are absconding and have left the country," the complaint filed on February 25, 2020, after over a year of account becoming NPA, the officials said. The complaint alleged that borrowers had removed entire machinery from old plant and fudged the balance sheets in order to unlawfully gain at the cost of banks' funds, it said. ABS KJKJ

SBI complains to CBI after Rs 411 crore loan defaulter flee country

Mumbai, Jan 31 () Bank of India on Friday reported a net profit of Rs 106 crore for the third quarter ended December as against a net loss of Rs 4,738 crore, helped by better recoveries and stable asset quality.
 The lender recovered Rs 1,700 crore from Essar Steel during the third quarter.
 "Our recoveries, including from Essar Steel, helped improve our interest incomes. We are able to maintain our NPA numbers," the bank's managing director and CEO A K Das told reporters.
 Recoveries during the quarter stood at Rs 6,462 crore, including Rs 1,700 crore from Essar Steel.
 He said recovery in the fourth quarter is likely to be around Rs 2,600 crore.
 The state-run bank's net interest income during the quarter rose 23.62 per cent to Rs 4,119 crore from Rs 3,332 crore in the year-ago quarter.
 Domestic net interest margins (NIM) improved to 3.45 per cent from 3.02 per cent, while global NIM improved to 3.07 per cent from 2.55 per cent.
 Gross NPAs remained stable at 16.30 per cent as compared with 16.31 per cent a year ago, while net NPAs stood at 5.97 per cent as against 5.87 per cent.
 The bank sees its gross NPA improving to 15-15.5 per cent and net NPA to 5.62-5.75 per cent by March-end.
 Slippages in December quarter increased to Rs 6,716 crore from Rs 4,315 crore, mainly due to three NBFCs accounts -- Dewan Housing Finance Ltd (DHFL), Reliance Commercial and Religare Finvest, Das said.
 The lender has an exposure of Rs 4,200 crore to DHFL, Rs 500 crore to Religare Finvest and Rs 450 crore to Reliance Commercial Finance.
 The bank expects its slippages to be below Rs 2,000 crore in March quarter.
 Bank of India's capital to risk weighted assets ratio (CRAR) on a standalone basis stood at 14.20 per cent, while tier-1 capital stood at 11.17 per cent and tier-2 capital at 3.03 per cent.
 The common equity tier (CET) ratio stood at 11.14 per cent.
 The bank's domestic advances increased 6.71 per cent, while CASA deposits (domestic) grew 9.55 per cent.
 Shares of Bank of India on Friday closed 2.57 per cent higher at Rs 67.75 apiece on the BSE. HV
 RVK

Bank of India reports Q3 net profit of Rs 106 cr

Mumbai, Jan 16 () LIC-owned IDBI Bank, currently under prompt corrective action since May 2017, is expected to hold meeting with the RBI this week to seek removal of operational restrictions, according to sources.
The lender will make a presentation to the Reserve Bank of India on its improved financial position, the sources said, adding the management is hopeful of coming out of the PCA framework by the end of this month.
The RBI had placed IDBI Bank in May 2017, after it had breached the thresholds for capital adequacy, asset quality (net NPAs was over 13 per cent in March 2017), return on assets and the leverage ratio.
Since coming under the PAC, more than a third of its entire book became dud loans in Q2 of FY18, with the gross NPA ratio touching 32 per cent and the net NPAs at 17.30 per cent.
"The presentation to the RBI will be on the key financial numbers. On the capital front and in terms of net NPAs, we have been able to make progress," the sources told .
A query sent to the bank did not elicit any response.
The PCA norms trigger if a bank's net NPA crosses 6 per cent or if CRAR (capital to risk weighted assets) is below the regulatory requirement of 10.88 per cent as of March 2019.
In the quarter to September 2019, its net NPA stood at 5.97 per cent and tier-1 capital and CRAR improved to 9.52 per cent and 11.98 per cent, respectively.
Capital infusion through recap bonds by the government in Q2, and also from LIC, and recovery from stressed accounts have also helped the bank in shoring up its capital position, another person familiar with the matter said.
In the second quarter of FY20, the bank received Rs 4,743 crore from LIC, which holds 51 per cent stake, and Rs 4,557 crore from the government which still owns 47.11 per cent.
Another positive is the recovery of close to Rs 3,000 crore from the NCLT resolution of Essar Steel and Ruchi Soya in the third quarter, further strengthening the capital position, the sources said.
The only area where the bank is still lagging is return on assets (RoA) which continues to remain negative for the fourth consecutive year. However, the bank is hoping some relaxation on the RoA front after the RBI eased the same for five other banks last year.
In September quarter of this fiscal, IDBI Bank had reported a net loss of Rs 3,459 crore, marginally better than Rs 3,602 crore in the year-ago period.
In FY19, RBI removed five banks -- Bank of India, Bank of Maharashtra, Oriental Bank of Commerce, Allahabad Bank and Corporation Bank -- from the PCA framework in two phases after capital support from government that resulted in improvement in their financial parameters.
Capital infusion helped these lenders meet requisite capital thresholds and reduce their net NPA levels to below 6 per cent.
The monetary authority as an effort to enhance its supervisory framework had introduced the PCA framework, based on structured early intervention mechanism, in December 2002.
The framework was subsequently reviewed by the RBI keeping in view the international best practices and recommendations of the working group of the Financial Stability and Development Council (FSDC) on resolution regimes for financial institutions and Financial Sector Legislative Reforms Commission.
The revised PCA framework was issued on April 13, 2017 and implemented on March 31, 2017. HV BEN BAL

IDBI to meet RBI this week; seeks to exit PCA framework

New Delhi, Oct 10 (IANS) The Reserve Bank of India has urged the Supreme Court to lift the across-the-board stay on classification of non-performing asset (NPA) till further orders as it has huge implications for the banking system In a fresh affidavit filed in the apex court, the RBI said: "It is humbly submitted that this hon'able court had given an across-the-board stay on classification of any account as NPA till further orders. If the stay is not lifted immediately, it shall have huge implications for the banking system, apart from undermining the regulatory mandate of the Reserve Bank of India." On September 3, in a respite to stressed borrowers, the Supreme Court had directed that accounts not declared NPAs as of August 31 should not be classified as such until further orders. On October 3, in an affidavit, the Centre had informed the court that any account becoming non-performing even due to the bank's or any other delay need not suffer from being labelled as NPA. Justifying the lifting of the stay on NPAs, the RBI cited its July 2015 circular aimed at reflecting the true and fair position of the accounts of banks so that the financial assets (which are public assets) will be accurately reflected in the books of accounts of the lenders. "The classification of a loan account as NPA, based on the record of recovery, actually enables the lenders to follow the regulatory guidelines with regard to income recognition and provisioning. Every regulatory forbearance has its trade-offs in terms of adverse incentives and unintended consequences", said the RBI in the affidavit. "It is further prayed that the interim order dated September 4, 2020 restraining classification of accounts into Non-Performing Accounts in terms of the directions issued by the RBI may kindly be vacated with immediate effect," said the RBI. The Centre also emphasised that it is not possible to revise its decision to waive interest-on-interest for loans up to Rs 2 crore, wherein the government would bear the cost for MSME loans and personal loans. "This decision by the government to provide additional relief to a large segment of borrowers has addressed the primary prayers of the petitioners," the Centre said. On the aspect of sector-specific relief instead of a monolithic resolution framework sought by reals estate and power sectors, the RBI said such prayers deliberately obfuscate the fact that resolution framework gives complete discretion to the lending institutions and borrowers to arrive at resolution plans tailored to the specific requirements of sector subject. The RBI cited its September 7, circular, which provides for separate thresholds for 26 sectors, including power, real estate and construction. In respect of those sectors where the sector-specific thresholds have not been specified, lending institutions have been permitted to make their own internal assessments. The RBI said that sectors such as power and real estate were already stressed even before the coronavirus pandemic on account of various factors pertaining to sector-specific problems. "Nonetheless, it is submitted that the travails of the realty sector cannot be solved through banking regulations. The banking regulations of the RBI cannot substitute the redressal of structural problems of the real estate sector," the affidavit read. The RBI response came after the top court earlier this week told the government that its response did not contain "necessary details" and asked the Centre and the RBI to bring on record the KV Kamath committee recommendations on debt restructuring. (Sumit Saxena can be contacted at sumit.s@ians.in) --IANS ss/tsb

Vacate stay on accounts' classification as NPAs, RBI urges SC

<ul><li><keyword id="6367143" type="UNKNOWN" weightage="20" keywordseo="LIC">LIC</keyword>’s board has approved a transaction wherein the state-owned insurer will take a 51% stake in <keyword id="67881" type="CITY" weightage="20" keywordseo="IDBI">IDBI</keyword> Bank. </li><li>The deal spares the cash-strapped <keyword id="26362" type="ORGANIZATION" weightage="20" keywordseo="Government">government</keyword> from bearing the expense of a <keyword id="6374681" type="DEFINITION" weightage="20" keywordseo="Bailout">bailout</keyword>. </li><li>IDBI is one of the worst-performing banks in India with a NPA ratio of nearly 28% and a net loss of ₹82.4 billion at the end of fiscal 2018. </li></ul>On July 16th, the board of the state-owned Life Insurance Corporation of India, the country’s largest insurer, approved the purchase of a 43.5% stake in the debt-ridden IDBI Bank, in a move that will give the former a majority stake of 51% in the latter. The deal is expected to cost LIC around ₹120 billion, sparing the cash-strapped government from bearing the expense of a fund infusion and cleaning up IDBI’s balance sheet. The insurer is buying the shares in IDBI from the Indian government, which owns a 86% stake in the bank. In the process, it is putting the investments of its policyholders on the line and endangering their claims to prop up a dying bank. It is also circumventing regulations imposed by the Insurance Regulatory and Development Authority of India (IRDAI), which limits insurers from owning more than 15% of any company. It received a one-time exemption from the regulator for doing so. An ill-advised move IDBI Bank is the worst-performing bank in India in terms of non-performing assets (NPA), with a NPA ratio ballooning to nearly 28% at the end of fiscal 2018, compared to 21% in the previous year. For the year ended March 2018, its loss widened by 60% to ₹82.4 billion. Given its large capital base, bolstered by the funds of 220 million clients, and market dominance LIC is the perfect ATM through which the government can infuse capital into failing state-owned companies. Despite pressuring LIC into the deal, the government has been sure to tout the possible “synergies” of such a combination, with some officials even going so far as to say that LIC is getting a deal at a good valuation. LIC, which has lost significant ground to private-sector insurers in the recent past, is expected to take advantage of the IDBI’s 2,000-odd branches to distribute its insurance products, forgoing the agent model as a result. But at what cost? IDBI has one of the weakest balance sheets in India’s banking sector and will require repeated infusions over the next couple of years. It was one of the main benefactors of the government’s recapitalisation plan, receiving <a href="https://www.thehindubusinessline.com/money-and-banking/idbi-bank-surges-on-non-core-divestment-stake-sale-talks/article22859705.ece">₹106 billion </a>worth of taxpayer funds in late 2017, but has failed to do anything with it. It is also unclear how LIC will turn IDBI’s operations around. Most importantly, the deal sets a bad precedent. It says that no matter how bad a state-owned company performs, no matter how many loans it extends without adequate due diligence, it will always have a way out. A government exit would have been more desirable, but interest from the private sector would have been muted as was the case with Air India. As a result, the government moved to avert a shutdown of the bank, avoiding any bad press before the upcoming national elections in 2019.

You Searched For "india bank npa" and got 10 results

RBI imposes penalty on Bank of India, Karnataka Bank

PTI

Central Bank of India reports higher Rs 6,430cr loss for FY19 due to NPA divergence

PTI

IDBI Bank likely to be out of PCA framework in fourth quarter

PTI

India’s government is merging three state-owned lenders to create one of the country’s largest banks

Dilsher Dhillon

RBI's reverse repo cut significant, but banks need to increase risk appetite: Economists

PTI

SBI complains to CBI after Rs 411 crore loan defaulter flee country

PTI

Bank of India reports Q3 net profit of Rs 106 cr

PTI

IDBI to meet RBI this week; seeks to exit PCA framework

PTI

Vacate stay on accounts' classification as NPAs, RBI urges SC

IANS

India’s largest insurer is bailing out a dying bank at the behest of the government

Dilsher Dhillon

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