IDBI likely to merge home finance subsidiary

The Industrial Development Bank of India (IDBI) is exploring the possibility of merging IDBI Home Finance, a 100 per cent subsidiary, with itself.

The lending insitution is also working on a unique arrangement in the run up to its conversion into a bank to increase its presence across the country.

It is planning to tie up with Stock Holding Corporation of India Ltd (SHCIL) to use around 60 of its offices as IDBI branches.

IDBI Bank is being roped in to help the institution to set up branches as well as the technology platform. In effect, IDBI Bank will play the role of a consultant in IDBI's conversion into a bank.

SHCIL, promoted by IDBI, has a network of over 100 branches. In the first phase, IDBI is planning to set up its desks in around 60 of SHCIL's branches. These offices will help IDBI in mopping up resources for its flexibond issues.

As and when the it gets the Reserve Bank of India nod for conversion into a bank, it will seal the arrangement by seeking branch licenses.

"At a later stage IDBI may think of merging SHCIL with itself as that will help the new bank to offer a host of financial products under one roof," an analyst said.

Beside IDBI, other stakeholders of SHCIL include Unit Trust of India, ICICI, Life Insurance Corporation of India, General Insurance Corporations and other state owned insurance companies, IFCI and Industrial Investment Bank of India. Sources said most of SHCIL are leasehold properties and discussions are on to get IDBI's entry there.

IDBI plans to convert round 30 of its 36 branches into bank branches. The remaining six "" smaller offices in the North-East "" are unlikely to be converted into branches.

IDBI Home Finance, its wholly owned subsidiary, has 16 offices in 12 cities which will also be converted into bank branches.

IDBI had taken over Tata Home Finance, a subsidiary of Tata Finance, and converted it into a home finance arm this year. Sources said IDBI branches will have the same look and feel as that of IDBI Bank.

The technology platform will also be on the line of IDBI Bank. IDBI has already identified more than 150 executives of IDBI Bank for working for the new entity on deputation.

This process will kick off in the next few months. These officials are likely to head the branches.

M R Srinivasan, former chief general manager in-charge of the department of banking operations and development (DBOD) in RBI, is advising IDBI on the transformation process.