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Amid life insurer LIC setting the ball rolling to acquire a 51 per cent stake in IDBI Bank, the lender’s MD and CEO, B Sriram, has completed his three-month tenure on September 29. However, there is no word yet from the Centre on who will replace him.
According to industry watchers, Sriram, a former SBI veteran (he was MD of SBI before he took charge of IDBI Bank), was expected to pilot the process of LIC acquiring a 51 per cent stake in IDBI Bank and steering it out of its bad loans trouble.
The IDBI Bank board is scheduled to meet on October 4 to consider a preferential allotment of equity shares aggregating to 51 per cent of the post-issue paid-up capital of the bank to LIC; the Centre will have to move quickly to appoint a new chief.
The meeting will also consider the modalities for conducting postal ballot for obtaining shareholders’ approval for the preferential issue of capital to LIC.
On June 20, the Centre had given additional charge to Sriram, who was then SBI MD, of MD & CEO of IDBI Bank, following MK Jain's appointment as RBI Deputy Governor.
Later, on June 30, the government gave Sriram full charge of IDBI Bank for three months.
The bank, in a notice to the exchange on September 28, said it had received a letter from LIC conveying approval of its board of directors for subscribing to its equity capital.
The subscription, through a preferential issue/open offer, will see the life insurer holding up to 51 per cent of the bank’s post issue subscribed paid-up capital.
LIC is expected to pump in ₹10,000-12,000 crore to take its stake up to 51 per cent in IDBI Bank, from 7.98 per cent as at June-end 2018. The government held a 85.96 per cent stake in the bank as at June-end.
The bank, which has been under the RBI’s so-called prompt corrective action framework since May 2017 in view of its high net NPAs and negative RoA, has put in place a comprehensive turnaround strategy to improve its financial position.
As at June-end, its gross NPAs and net NPAs stood at 30.78 per cent of gross advances and 18.76 per cent of net advances, respectively.
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