Cabinet Approves Over Rs 9,000 Crore Capital Infusion In IDBI Bank

The Union Cabinet chaired by the Prime Minister Narendra Modi has approved the Infusion of Rs 4,557 crore by Government in IDBI Bank, the government said on Tuesday.

The Union Cabinet chaired by the Prime Minister Narendra Modi has approved the Infusion of Rs 4,557 crore by Government in IDBI Bank, the government said on Tuesday. (Image: PTI)

NEW DELHI: The Union Cabinet chaired by the Prime Minister Narendra Modi has approved the Infusion of over Rs 9,000 crore in the IDBI Bank, the government said on Tuesday. The Union Cabinet has cleared recapitalisation of IDBI Bank with one-time infusion of funds by both the government and the LIC, PTI quoted Information and Broadcasting Minister Prakash Javadekar as saying. Out of Rs 9,000 crore, the government will provide Rs 4,557 crore as one-time re-capitalisation to IDBI Bank, he said, adding that LIC will infuse Rs 4,700 crore. "It will help in completing the process of IDBI Bank’s turnaround and enable it to return to profitability and normal lending, and giving Government the option of recovering its investment at an opportune time," the government said in a statement. IDBI Bank needs a one-time infusion of capital to complete the exercise of dealing with its legacy book. "It has already substantially cleaned up, reducing net NPA from peak of 18.8% in June 2018 to 8% in June 2019. The capital for this has to come from its shareholders. LIC is at 51% and is not allowed to go higher by the insurance regulator. Of the Rs. 9,300 crore needed, LIC would meet 51% (Rs. 4,743 crore). Remaining 49%, amounting to Rs. 4,557 crore, is proposed from Government as its share on one time basis," the government added. After this infusion, IDBI Bank expects to be able to subsequently raise further capital on its own and expects to come out of RBI’s Prompt Corrective Action (PCA) framework sometime next year. This cash neutral infusion will be through recap bonds i.e. Government infusing capital into the bank and the bank buying the recap bond from the Government the same day, with no impact on liquidity or current year’s Budget. Following Cabinet’s approval in August 2018, LIC acquired 51% stake in IDBI Bank. The government continues to be a promoter and holds 46.46% stake.