The Hindu Business Line : Will the merger do an ICICI?

IDBI's merger with its offspring IDBI Bank has thrown open a few questions. What challenges await the combined entity? Will the merger process have something to absorb from the merger of another financial institution: ICICI with its subsidiary, ICICI Bank two years ago. Will the new IDBI be able to fulfil its development mandate in its new avatar?

We asked a few industry experts for their take on the issue. Mr S. Venkitaramanan, former Governor of RBI, said, "IDBI would now have to focus on retail. To that extent, its focus on term lending would get affected. In developing countries, there is still need for development institutions. What has happened is the inevitable fallout of reforms."

Mr N. Vaghul, Chairman, ICICI Bank, said that the "merger would certainly benefit IDBI." Asked if IDBI would be able to scale up its business as successfully as ICICI, he said, "The business ramp-up at ICICI did not happen overnight. We had planned it for four to five years. Knowing the IDBI Chairman as I do, he must have something similar up his sleeves. He would have been planning for the merger. I have great faith that they will be able to do it." He said that fulfilling the mandate for development banking and at the same time going retail could emerge as a big challenge for IDBI.

Mr R. Raghuttama Rao, Joint Managing Director, ICRA Advisory Services, felt that the merger process itself represented a comparatively smaller challenge for IDBI. He said, " The bigger challenge that IDBI would face is to galvanise the institution, change the mindset, grow as a bank and handle the issue of attracting manpower. This institution had run aground. There were issues such as salary and the image of being a Government controlled organisation that it had to deal with." He added that IDBI could pick out a few lessons from IDBI Bank's success in terms of clear positioning in the retail space.

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