IDBI to manage losses by selling non-core assets
State-owned lender, IDBI Bank Ltd's board will sell some of its non-core assets to manage a gross bad loan ratio of 15.16% in December-end.
IDBI holds a stake in National Securities Depository Ltd (NSDL), NSDL e-governance Infrastructure, Biotech Consortium India, North Eastern Development Finance Corp. and Pondicherry Industrial Promotion Development and Investment Corp. Ltd. It hired PWC to boost valuation before sale.
What is a bad loan ratio(BDR)?
BDR is the ratio of bad loans to a total number of loans issued by the bank. A bad loan commonly known as non-performing asset (NPA), is a loan against which a repayment from the customer has been due for over 90 days.
Govt's plans for IDBI
The government, in its budget last year, had announced that it was looking at bringing down its stake in IDBI Bank by half. However, it did not follow the proposal through. This sale is the only way the bank can infuse fresh capital.
IDBI is governed by a separate legislation that allows the government to reduce its stake to below 51% without parliament approval.
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IDBI's sale of non-core assets
IDBI plans to raise about Rs. 5,000 crore in the planned sale that was announced in May 2016 and approved today by its board. IDBI has not yet disclosed names of its non-core assets. These are assets not essential for business operations.
The bank also holds a stake in subsidiaries IDBI Asset Management, IDBI Federal Life Insurance, IDBI Capital Markets and IDBI Intech etc.