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IDBI plans to sell Rs 10,000 cr of stressed assets to cut sour debt

PW Bureau

With bad-loan ratio narrowing and profits increasing, IDBI CEO Sharma believes the bank will be out of the RBI’s PCA framework by September New Delhi: IDBI Bank Ltd is looking to trim down its soured debt by putting Rs 10,000 crores (US$ 1.4 billion) of stressed assets on sale. The lender, with the worst-bad loan ratio in India, is also planning to accelerate its efforts to recover dues from delinquent borrowers. Following the Reserve Bank of India’s announcement of stricter rules, banks dealing with the world’s worst bad-loan ratio are intensifying efforts to recover delinquent debt. “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,” Rakesh Sharma, chief executive officer of IDBI Bank said, adding that the lender is also seeking to sell stressed loans “by June-end to quicken the pace of clean-up exercise.”

LIC acquisition boosting IDBI turnaround

The embattled lender’s turnaround began to move more quickly after the Life Insurance Corporation of India (LIC) acquired controlling stake in IDBI Bank from Prime Minister Narendra Modi’s government. LIC has put in over Rs 210 billion into the Mumbai-based lender to boost its risk buffers and bring it out of the regulator’s prompt corrective action framework that restricts lending and the expansion of network.

IDBI to be out of PCA plan by September

With bad-loan ratio narrowing and profits increasing, Sharma believes IDBI will be out of the RBI’s framework by September. The lender’s gross bad loan ratio was around 30 percent as of December 31, exchange filing shows. IDBI is also seeking to raise around Rs 10 billion by selling its holding in National Stock Exchange and National Stock Depository Ltd over the next month, Sharma added.