The Hindu Business Line : IDBI Bank plans two subsidiaries

EXPANSION DRIVE: Mr V.P. Shetty (left), Chairman and Managing Director, IDBI Bank, and Mr O.V. Bundela, Dy Managing Director, addressing a press conference in Bangalore on Saturday. - G.R.N. Somashekar

Bangalore April 7 IDBI Bank Ltd has proposed setting up a private equity fund and a mutual fund as separate subsidiaries in a bid to become a complete financial powerhouse.

Speaking to presspersons here today, the IDBI Bank Chairman and Managing Director, Mr V.P. Shetty, said, "Both these arms will be set up this year, once clearances from the Reserve Bank of India, Securities Exchange Board of India and the Government are received."

Mr Shetty was speaking to presspersons after opening a new branch in Indiranagar, Bangalore. He said the corpus for the private equity arm would be decided only after the clearances. The mutual fund subsidiary would be set up by IDBI Bank on its own, though it was not averse to any foreign joint venture partner, he added.

He said the bank planned to add 100 new branches each year for the next five years, though he ruled out any fresh acquisitions in the next six months, when consolidation with the erstwhile United Western Bank was still under way.

This included five branches in Moscow, Beijing, Singapore, Bahrain and a representative office in Dubai.

Referring to the bank's performance, Mr Shetty said deposits during the last financial year was Rs 42,000 crore. Advances comprised Rs 62,000 crore for the period. He said that the UWB acquisition contributed Rs 9,000 crore of business to the bank. The bank was still considering a hike in the prime lending rate, which currently stands at 11.75 per cent. "We will take a view on a hike over the next few days," Mr Shetty said.

Home loan portfolio

Referring to the home loan portfolio, Mr Shetty said that 90 per cent of it was linked to floating rates. Asked whether this would lead to an increase in non-performing loans with the rise in rates, he said the issue was being addressed with the borrowers. "We are amenable to stretching the loan maturities, whenever borrowers want the option," he said.

The bank had made cash recoveries of Rs 2,000 crore, through the Stressed Asset Stabilisation Fund (SASF), during the last two years. This year the bank was targeting another Rs 1,000 crore. The recoveries would contribute to the bank's bottomline, since the recoveries comprised "zero cost funds" All of the SASF's funds are maintained as a current account with IDBI Bank, he said. The bank was also continuing with its infrastructure focus. For the purpose the bank has earmarked Rs 15,000 crore for various infrastructure projects, he added.

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