IDBI Bank, which recently got lifted out of the RBI’s prompt corrective action (PCA) list, is looking to sell its remaining 25% stake in the insurance business to joint venture partner Ageas after the government allowed foreign holding to climb to 74%.

“When we sold the 23% stake to Ageas, foreign companies could own only 49%. Now that the government has allowed 74% foreign ownership, we will take a decision in this regard if any interest is forthcoming,” IDBI Bank managing director and CEO Rakesh Sharma told Indianbankingnews.com.

IDBI Bank has got the board approval to sell off its stake in the insurance subsidiary, Ageas Federal Life Insurance Company, Sharma added.

While multinational insurance company Ageas holds 49% stake, Federal Bank owns 26% in the insurer. IDBI Bank reduced its stake in Ageas Federal Life Insurance Company from 48% to 25% after selling 23% of equity shares to Ageas for Rs 507 crore.

IDBI Bank has also started the hunt to sell its mutual fund business after Muthoot Finance's acquisition proposal failed to get the Reserve Bank of India (RBI) clearance in late November last year.

“Our focus is to sell off our non-core assets. First on the exit list is the asset management outfit. We have the board approval to initiate fresh steps for sale of our share in IDBI Asset Management Ltd and IDBI Mutual Fund Trustee Co Ltd,” Sharma said.

Earlier, IDBI Bank had shortlisted Muthoot Finance, but the non-bank lender failed to get the regulatory nod as the RBI felt that “sponsoring a mutual fund or owning an asset management company is not in consonance with the activity of an operating NBFC (non-banking financial company)”. Muthoot Finance had proposed to purchase 100% of IDBI AMC and IDBI MF Trustee Company for a total consideration of Rs 215 crore.

The other non-core asset put by IDBI Bank on sale is its 11% stake in NSDL. “We have 26% stake in NSDL. But there is a regulatory requirement to pare it down to 15%. We plan to offload 11% of our stake, for which the board has given its approval,” Sharma said.

IDBI Bank will also offload its entire 19.18% stake in bad loan aggregator Asset Reconstruction Company India Ltd (Arcil), Sharma added.

With the bank making profits for the last four consecutive quarters, capital is not an issue but selling off non-core assets have been high on the agenda of the bank for long as it gets ready to be privatised.

“We are not privy to the privatisation plans of the government. We are already classified as a private sector bank. Initially, when LIC (Life Insurance Corporation) was acquiring 51% stake in the bank, there was a lot of uncertainty in the minds of employees. I had to conduct a number of town hall meetings to assuage the fears of the employees. But now things are normal and the employees are happy,” Sharma said.

LIC holds 49.24% stake in the bank while the government has 45.48% equity shares.

Being out of PCA, the bank has set a target to grow its corporate loan book to 8–10% while retail credit would grow by 12% in the next fiscal. “While the bank was in PCA, we could only do retail and priority sector loans. Now we will cautiously look at growing our corporate loans also,” Sharma revealed while speaking about the bank’s road map for growth in the next financial year.

On the liabilities side also the bank has shed its high cost bulk deposits and replaced it with low-cost CASA (current account savings account). Now CASA forms 48.97% of the bank’s total deposit base, thus helping it to bring down its funding cost.

IDBI Bank had gross non-performing assets (NPAs) peaking at over 31% of its advances. This has now come down to 23.52% to be at Rs 37,559 crore. Out of this, Rs 31,924 crore is fully provided for by the bank.

IDBI Bank’s total advances stood at Rs 1,59,663 crore at the end of 31 December 2020. The bank has admitted Rs 45,756 crore of bad loans into the National Company Law Tribunal (NCLT). Another Rs 17,598 crore is waiting to be admitted into the bankruptcy court.

The bank is expecting to make a recovery of Rs 1,000–1,200 crore in the fiscal fourth quarter through resolutions of 3–4 big corporate accounts. This will take the bank’s total recoveries to Rs 4,500 crore in the current financial year. In the next fiscal, the bank hopes to recover Rs 4,000 crore through one-time settlements, recovery from NCLT and internal recovery efforts.

When companies go for liquidation, the recoveries are poor. In one-time settlements, the recovery depends on the value of security and the worth of guarantors. However, the bank expects aggregate average recovery to be between 25% and 30% of its aggregate NPAs.

About 44% of the bank’s home loan book came under the RBI-permitted moratorium scheme due to Covid-19. “But that is not a big worry for us as collections have reached the pre-Covid levels,” Sharma said.

The RBI imposed PCA on the bank on 5 May 2017 and slapped additional restrictions in March 2018 due to the high NPAs from infrastructure loans. The bank got out of PCA on 10 March this year.