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Published 23:29 IST, September 3rd 2019

IDBI bank recapitalisation gets CCEA nod; Centre & LIC to infuse funds

Union minister Prakash Javdekar on Tuesday announced that the government has cleared the recapitalisation of IDBI bank, with the decision taken at the CCEA meet

Reported by: Misha Bhatt
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Union minister Prakash Javdekar on Tuesday announced that the government has cleared the recapitalisation of IDBI bank. The approval for recapitalisation of the Mumbai-headquarter bank was given at a meeting of the Cabinet Committee of Economic Affairs (CCEA) and will entail a one-time fund infusion by the Government and LIC (Life Insurance Corporation). 

In his briefing after the CCEA, Javdekar said,  'This will help both IDBI and LIC. It will also show the government's commitment to take banking to a sound level.'  He also added that the bank's bad loans have reduced and it's Provision Coverage Ratio (PCR) has increased.

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Government announces one-time fund infusion with LIC

The recapitalisation would see Rs. 9,000 crore being infused into IDBI Bank. This comes after the bank reported a net loss of 3,800 crore in the first quarter of the financial year 2019-20. Earlier last month, IDBI Bank was put on credit watch by the rating agency S&G Global. IDBI Bank's shares also plunged to 9.3% with the price dropping down to Rs. 26.05 on the Bombay Stock Exchange (BSE) after the bank's unsecured debt rating was put on 'credit watch negative' by S&G global. 

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This recapitalisation move comes after Finance Minister Nirmala Sitaraman announced a series of measures to bring the economy back to stable health. This move by the FM also included the immediate release of Rs. 70,000 crore to Public Sector Banks. Significantly, 10 public sector banks were merged into four big banks, with the Finance Minister saying that the measures announced would put India on the path to getting credit availability commensurate with the goal of being a $5 trillion economy.

Providing an update on other measures announced a week even before that, Sitharaman said that the banks had also agreed to pass on the benefit of a repo rate cut to their customers. Following this move, the EMIs of various loans will be reduced by linking the repo rate with the interest rate. These announcements come amid India's GDP growth falling to a 6.5-year-low in Q1. 

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15:44 IST, September 3rd 2019