IDBI Bank, LIC constitute joint task force to chalk out future roadmap

IDBI Bank and Life Insurance Corporation of India (LIC) have constituted a joint task force to chart out the future roadmap, both for the bank as also its associate companies, even as the bank is considering extending the appointment of Rakesh Sharma, the current Managing Director (MD) and Chief Executive Officer (CEO) of the Bank, for a further period of three years.

This move follows LIC completing acquisition of 51 per cent controlling stake in IDBI Bank on January 21, 2019. The bank received total capital of Rs. 21,624 crore from LIC. Sharma was appointed by the Government to head the bank for a period of six months on October 5, 2018.

The bank, in a statement issued on Sunday, said the joint task force has been constituted to realise the full potentials arising out of business synergies. The major areas of synergy identified for the immediate short term are pertaining to selling of LIC policies through IDBI Bank branches, management of cash and other premium receipts of LIC through the bank’s branches, enabling the technical wherewithal available in both the bank and LIC for offering digital solutions to both, the policy holders of LIC and customers of IDBI Bank.

The statement elaborated that the long term strategy includes common investment strategy, use of other resources like real estate, commercial and residential space, IDBI Bank branches, premises and ATMs, digital marketing, rationalization of the common subsidiaries in Mutual Funds, Life Insurance etc.

IDBI Bank has initiated the process of divesting its 48 per cent stake in IDBI Federal Life Insurance Company as under current IRDAI regulations, a single entity cannot have two competing insurance businesses. Similarly, the bank and its wholly-owned subsidiary, IDBI Capital Market Services Ltd may also divest their stakes -- 66.67 per cent and 33.33 per cent, respectively -- in IDBI Asset Management Ltd as LIC too has its own mutual fund.

"Additionally, a Working Group, has been created to carry forward the initiatives identified for synergy and to effectively implement the decisions taken at the management level," the statement added.

The new Board will be entrusted with the responsibility of charting out a fresh growth strategy for the bank as also revamp the corporate governance structure to ensure best-in-class business practices, the bank said. The bank has already started the process of appointing two new Deputy Managing Directors for the bank, which will be through open competition from the market.

"The bank has also started reviewing all its policies including credit, investment and its internal processes, risk management practises etc with the help of consultants. Greater opportunities will emerge for employees of the bank as it strengthens its financials through business growth. Furthermore, the bank has also started revamping its Performance Measurement System (PMS) - IDBI Performance Assessment and Continuous Evaluation (i-PACE) – to make it more objective and system-driven," the statement added.

IDBI Bank’s net loss widened to Rs. 4,185 crore in the third quarter ended December 31, 2018, against Rs. 1,524 crore in the year-ago period, due to a jump in provisions towards bad loans.

With this strategic alliance, the bank said it stands to gain immensely as it will be able to augment its retail business, thereby de-risking its business portfolio and ensuring increasing of other income/operating profit, NIM (net interest margin) and substantial increase in CASA (current account, savings account). The bank has already recorded noticeable improvements in CASA ratio to 38 per cent (of total deposits) as on December 31, 2018, it added.

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