IDBI Bank plans to raise more capital as part of its turnaround plan
IDBI Bank says given the stress in the corporate sector, the bank will restrict growth in the corporate loan book and focus on increasing retail and priority sector asset base
Mumbai: IDBI Bank Ltd on Thursday said it has formulated a comprehensive turnaround strategy to recover loans, check slippages and strengthen its capital base.
“Given the stress in the corporate sector, the bank will restrict growth in the corporate loan book and focus on increasing retail and priority sector asset base. This will help the bank to reduce risk weighted assets and improve capital adequacy ratio in the short term,” IDBI Bank said in a press release.
IDBI Bank is planning to raise an additional capital in the medium term, over and above the Rs1,900 crore that it received from the government under Indradhanush programme.
The bank expects capital adequacy ratio to improve through sale of non-core assets, continued government support and churning of corporate loan book to reduce risk weight of the portfolio. However, sale of non-core assets will depend upon the market conditions, for which the bank has already initiated the process.
Moody’s Investors Service on Thursday downgraded IDBI Bank’s local and foreign currency bank deposit ratings. Icra, too, had downgraded its outstanding debt on 23 May.
According to Moody’s, the bank’s buffers against further asset quality stress remain weak and its capacity for internal capital generation will remain constrained by low net interest margins and high credit costs. The bank will remain dependent on capital infusions from the government to meet the minimum capital standards.
Gross non-performing assets (NPAs) at IDBI Bank soared 80% to Rs44,752.59 crore at the end of the March quarter from Rs24,875.07 crore a year ago. As a percentage of total loans, gross NPAs rose to 21.25% at the end of the March quarter, compared with 15.16% in the previous quarter and 10.98% in the year-ago quarter.
The bank’s troubles have been compounded after the Central Bureau of Investigation (CBI) arrested its former chairman Yogesh Aggarwal and other officials over a loan granted to the now defunct Kingfisher Airlines Ltd.