The government should not use IDBI Bank’s present plight, arising from bad loans, to reduce its stake to less than 51 per cent, according to the All India Bank Employees Association. Such a move would amount to shirking from its commitment to Parliament and the nation, it added.
In a letter to the Finance Minister, the association highlighted the fact that when the government brought the enactment in 2003 to convert IDBI into IDBI Bank, it gave a categorical assurance on the floor of Parliament that it would maintain not less than 51 per cent equity holding in the new entity. On the basis of this assurance, the Bill was approved by Parliament.
“If IDBI Bank’s bad loans are on account of bad and malafide decisions of the Executive of the Bank, they must be taken to task.
“If the accumulation of bad loans are due to a change in economic scenario and such huge infrastructure loans are bad today, the government must step in and provide additional capital,” said CH Venkatachalam, General Secretary, AIBEA.
As of March-end 2018, IDBI Bank’s bad loans rose to 27.95 per cent of gross advances, up from 21.25 per cent as of March-end 2017.
In absolute terms, bad loans stood at ₹55,588 crore as of March-end 2018, against ₹44,753 crore as of March-end 2017.
Referring to the proposal to allow Life Insurance Corporation of India (LIC) to increase its investment in IDBI Bank, the association said that while investment is a part of LIC’s business, it cannot be at the cost of the common people who are LIC’s policy holders.
“It is also a well-known fact that like banks facing huge bad loans, LIC is also saddled with a huge portfolio of non-performing assets/investments.
“Instead of taking stringent measures to address this vital problem, adding further investments in a loss-making bank which is facing huge bad loans is not a fair proposition,” said Venkatachalam.
Meanwhile, referring to the categorical assurance given by Finance Minister Jaswant Singh on December 8, 2003, in the Lok Sabha “that the government shall at all times retain its shareholding at not less than 51 per cent”, S Nagarajan, General Secretary, All India Bank Officers Association, in a letter to Arun Jaitley, said: “We urge upon you to advise the Finance Ministry to uphold the sanctity of the assurances given by the Minister of Finance and also abide by the provisions of law related to capital infusion in IDBI.”
“We once again request you not to permit LIC to invest beyond the limit prescribed by IRDA, and any exemption given would became a permanent practice in our nation,” said Nagarajan.