IDBI Bank’s privatisation experiment ill-timed: Moily
Former Union minister Veerappa Moily has said NPAs and stressed loans are very high, and at no point of time after the nationalisation of banks has the situation come to such a pass
Pointing to the weak health of public sector banks, Veerappa Moily, chairman of the Parliamentary Standing Committee on Finance, has mounted a scathing attack on the National Democratic Alliance (NDA) government’s haste to experiment with IDBI Bank’s privatisation.
In conversation with Business Standard, Moily, a Congress leader and Lok Sabha member from Karnataka, said: “Non-performing assets (NPAs) and stressed loans are very high. At no point of time after the nationalisation of banks has the situation come to such a pass. It is the worst situation.”
Moily said banks and the economy of the country were in vulnerable situation. “If an experiment like disinvestment in banks is done now, some of them (banks) may have to be closed. The patient may get to the operation table, but there is no guarantee that he would come back alive. So the government can’t apply normal rule of surgery at this point of time.”
He, however, clarified he is not against the idea of strategic disinvestment. “It (disinvestment) is for infusing reforms in the governance, expand the capital base and invite public to participate. But, if that process is used only for the purpose of finding finance for the government and dilute the public sector, perhaps a day will come when the public sector will suffer.”
The bank had made a presentation before the Standing Committee in the first week of November in Mumbai.
Despite a healthy rise in net interest income, IDBI Bank’s net profit for the second quarter ended September 2015 was flat at Rs 119.5 crore on higher provisions for stressed loans.
The gross NPA of the bank stood at 6.92 per cent (Rs 14,757 crore) in September 2015, up from 5.72 per cent (Rs 11,559 crore) in 2014. The portfolio of standard restructured loans was Rs 16,025 crore in September 2015. Its provisions for bad loans provision and contingencies rose to Rs 1,289 crore in the second quarter of FY16 from Rs 990 crore in the year-ago period. Its provision coverage was 68.13 per cent.
Asked about the move by the government on privatisation, IDBI Bank’s managing director and chief executive Kishor Kharat maintained there was no communication on divesting its stake below 51 per cent nor has it sought the bank’s views on the same.
IDBI Bank is registered under the Companies Act. The Articles of Association of IDBI Bank requires government to keep at least 51 per cent stake at all times. The government holds 76.5 per cent stake in the bank as of end-September 2015.
The standing committee has already gone into the question of non-performing loans and it will shortly come out with a report on it as well as on stressed loans. Most sectors are failing: the manufacturing sector is not picking up at all and the power sector is heavily indebted, Moily said.