Government will infuse Rs 4,557cr in IDBI, LIC will put Rs 4,743cr

New Delhi: Cabinet on Tuesday approved a capital infusion of Rs 4,557 million in IDBI Bank , with LIC contributing another Rs 4,743 million rupees in an attempt to recover the health of the lender.

The IDBI has been suffering losses for 11 quarters and has gross non-productive assets (NPA) of almost 29% of its loan portfolio, which led the RBI to curb its operations under the Rapid Corrective Action (PCA) framework .

On Tuesday, TOI, in its Delhi and other editions, since Mumbai was closed because of Ganesh Chaturthi, had reported on the infusion plan of Rs 9,000 million. While the government had managed to get LIC to acquire a majority stake in the lender, making it a private bank, it was waiting for a capital infusion proposal for approximately three months and finally decided to put its share of the money. But with the infusion of capital into other banks almost finished, the government decided to release money for IDBI at a time when companies find it difficult to increase debt.

After this infusion, IDBI Bank expects to be able to subsequently raise further capital on its own and expects to come out of RBI's PCA framework submits next year. This cash neutral infusion will be through recap bonds ie government infusing capital into the bank and the bank buying the recap bond from the government the same day, with no impact on liquidity or current year's budget, an official statement said. It added that the one-time infusion was needed to complete the exercise of dealing with its legacy book, which has substantially been cleaned up.