In another step to consolidate subsidiary companies, IDBI Bank plans merge IDBI Gilts Ltd, wholly-owned bond house, with itself.
Earlier in July board of bank gave nod to merge IDBI Home Finance, housing finance subsidiary, with itself. The decision to merge home finance was made the behest of the government. Bank wanted to sale-off this company when Yogesh Agarwal was heading bank.
The board of directors of the Bank on Thursday gave in-principle approval for merger of IDBI Gilts, a 100 per cent unlisted subsidiary, with Bank, bank chief financial officer P Sitaram said.
IDBI Gilts was set up undertake Primary Dealer [PD] business - underwriting in auction for government securities and bond trading. It got nod to commence business in February 2007. Its subscribed equity capital was Rs 180 crore as on March 31, 2010.
Another IDBI Bank official said it is a loss making subsidiary and it is tough for standalone PDs to survive. Allowing this entity to continue operations will mean keep pumping extra capital at a time when other subsidiaries like insurance venture needs equity infusion. IDBI Gilts has reported losses for last two years. For 2009-10 its net loss was Rs 18.09 crore as against Rs 19.75 crore in 2008-09.
Also, the PD activity can be carried out within bank also. Hence one could do away with duplication, official added.
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Asked about timeline for merger of PD subsidiary, Sitaram said bank expects to complete merger process by March 2011. Bank will absorb existing staff working at IDBI Gilts.
Bank wants to make treasury operations more active and it will need extra hands which would be drawn from IDBI Gilts.