Concerned over the proposed investment by Life Insurance Corporation of India (LIC) in IDBI Bank, the All India LIC Employees Federation is examining the possibility of taking legal recourse to nix the move.
The federation has already written to the top brass of the life insurance behemoth seeking to know whether IDBI Bank, whose bad loans soared to about 28 per cent of total advances as of March-end 2018, makes for good investment for LIC. “IDBI Bank’s gross non-performing assets at the end of March quarter 2018 stood at ₹55,588 crore. This means that the bank will need significant amount of capital to clean up its books and maintain minimum levels of regulatory capital.
“It should also be noted that no private investor has shown any interest in IDBI Bank even though the government has wanted to sell equity for over two years now,” said Rajesh Kumar, General Secretary, All India LIC Employees Federation.
LIC’s Board on Monday gave its approval to up its stake in IDBI Bank from 7.98 per cent to up to 51 per cent. The government currently holds 85.96 per cent stake in the public sector bank.
Rising NPAs
To a question whether the federation will take legal recourse vis-a-vis LIC’s investment decision in IDBI Bank, Kumar said it will ponder over the possibility of filing a public interest litigation in the Supreme Court.
“LIC Act is very clear about investment of money and policyholders premium. The corporation has to invest very wisely and see that the security of the money is ensured.
“The way NPAs (non-performing assets) are rising every year, it will be very difficult if LIC keeps on investing in such bad deals,” said Kumar.
Referring to IDBI Bank’s precarious NPA situation and LIC’s intention to substantially raise its stake in the bank, the federation’s General Secretary cautioned that there is contagion risk on the policyholders’ precious savings, which will grossly impact the capability of LIC to serve policyholders.
Meanwhile, CH Venkatachalam, General Secretary, All India Bank Employees’ Association (AIBEA) said: “We will watch whether LIC’s investment in IDBI Bank will reduce the government’s stake in the bank to less than 51 per cent. If it doesn’t then we have no issue. But if it does, then we will take objection.”
Venkatachalam underscored 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 the government would maintain not less than 51 per cent equity holding in the new setup at all times. On the basis of this assurance, the Bill was approved by Parliament.
“We will tell the government that you have to honour your commitment (of maintaining minimum 51 per cent stake). The investment by LIC is okay. But it should be only up to 49 per cent.
“…the government should not use the present plight of the bank created due to bad loans to reduce its stake to less than 51 per cent, which would amount to shirking its commitment to Parliament and the nation,” he said. The AIBEA General Secretary observed that while investment is a part of LIC’s business, it cannot be that all loss-making institutions are to be bailed out by LIC at the cost of the common people who are investors in LIC.