New Delhi, Nov. 28: The Industrial Development Bank of India today ruled out a reverse merger with IDBI Bank, its retail banking unit, but said its plans to enter the insurance sector “were very much on.”
“There is no proposal for a merger with IDBI Bank,” P P Vora, chairman of IDBI told a scrum of reporters after the board meeting. “We would like to retain our IDBI brand equity ... IDBI Bank will have to acquire a new name for their banking operations.”
The reverse-merger option had assumed significance on the back of the government’s go-ahead sign for the institution to acquire a banking licence. This implies IDBI will sell off IDBI Bank to generate cash to pare down losses.
Earlier, this month the Cabinet had decided to repeal the IDBI Act, which will enable IDBI to corporatise and acquire a banking licence. Bank officials say IDBI is likely to sell off its stake in IDBI Bank in favour of a private player, including foreign investors or existing nationalised banks once it acquires the banking licence.
“The sale is inevitable but Vora probably hasn’t made up his mind on the timing,” a senior bank official told The Telegraph. IDBI holds a 57 per cent stake in IDBI Bank. However, it has decided to offload around 14 per cent in favour of Small Industries Development Bank of India (another co-promoter of IDBI Bank with a 14 per cent equity) after the RBI directive asking the institution to bring down its holding to around 49 per cent.
However, IDBI’s plans to foray into insurance sector seems to be on track. “Our plans of insurance is very much on and we haven’t given up on anything,” Vora told newspersons.
The institution has long been in talks with the US-based Principal group to mark its foray into insurance. There has also been talks that it may tie up with Principal for pension funds too. The FI might start as a retailer of insurance products.
Vora said that he was also in talks with Principal on the future of its asset management company. “We are in talks with them. Either we will buy out their stake or vice-versa. But nothing has been finalised as yet,” Vora said.