The Hindu Business Line : IDBI hires consultant for insurance foray

The financial institution, which intends to enter first the life insurance segment, plans to work out a clear-cut proposal within the next few months, Mr V.P. Shetty, Chairman, said, adding that particulars of the proposed foray (such as the possible involvement of partners, foreign or otherwise) were yet to be decided.

Watson Wyatt, which focuses on financial management and human capital, specialises in employee benefits, technology solutions and insurance services. In India, it has roped in a former head of SBI Life, whose expertise in the area is expected to be put into good use insofar as IDBI's own plans on this front are concerned.

The consulting company is known as an advisor for a range of clients, including life, non-life and health insurance outfits.

As its Web site points out, it caters to reinsurers, bancassurers and companies involved in purchase/distribution of insurance and miscellaneous financial services.

"In case we do set up an insurance arm, we do not intend to begin with non-life (insurance) business," the IDBI chief told newspersons. He also hinted that it had started initial talks with a few probable partners.

Mr Shetty was in Kolkata to inaugurate a branch, the seventh in the city.

In case its plans are taken forward, IDBI's foray into the sector will unleash a behemoth. It has over the years catered to a huge number of investors (read: bond holders), including retail investors who have subscribed to tax-saving and other instruments offered by it. It also has direct links with many corporates as a lender as well as a stakeholder.

At the moment, IDBI's connection with insurance is solely by way of distribution. It offers clients insurance products - the same way it offers other investment options like mutual funds.

"We hope to go beyond this. But it will be too early to suggest that we will do it on our own or establish tie-ups with other parties. At any rate, the insurance story will be clearer within three months or so," Mr Shetty mentioned.

To focus on power, roads, cement

IDBI has decided to focus on power, roads, and cement in its bid to increase allocations to sectors linked to the development of infrastructure.

The bank, which has estimated a compounded annual growth rate of 25 per cent over the next three years, has budgeted higher credit deployment this year, Mr V.P. Shetty, Chairman, told newspersons on Monday.

The size of IDBI's balance sheet, which now stands at Rs 81,000 crore, is expected to increase to roughly Rs 90,000 crore by the end of the current fiscal. A 20-25 per cent growth in deposits is expected in 2005-06.

IDBI, whose net NPAs stand at 1.74 per cent, proposes to continue with its NPA reduction exercise.

Over the last few months it has entered into a number of negotiated settlements and a fair realisation target has been set for the year.

To a query on the possible merger of IFCI, the IDBI Chairman said that such a move should ideally happen keeping in mind the interests of IDBI's shareholders, especially the minority shareholders.The steel sector, loans to which had led to multiple NPAs for IDBI, is "no longer a sensitive industry", Mr Shetty said, adding that the FI was open to lending to steel companies if such exposure made business sense.

The sector, which has undergone significant restructuring in recent times, has shown improving financial health. It has also seen a slew of capacity expansion plans taken up by many producers.

"Steel should be doing well over the next couple of years. And this should enable us to consider more loan proposals."

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