IDBI will go for more takeovers, says chairman

The Industrial Development Bank of India (IDBI) will go for more takeovers to enhance balance sheet, post-merger with IDBI Bank.

It wants to become the second-largest commercial bank in the country after the State Bank of India by displacing ICICI Bank. The merged entity will immediately rank seventh in terms of asset base.

IDBI chairman and managing director Meleveetil Damodaran said the No. 2 slot "could be achieved in the short term." After the merger with its banking arm, IDBI's combined asset base would rise to Rs 79,923 crore.

Though October 1 has been set as the date to convert IDBI into a bank, its banking activities will start only a few months later.

"When we have a readymade set up in terms of bank branches, we need not set up fresh banking operations," said Damodaran. He was speaking today at the launch of a series of corporate awards.

The new IDBI would have at least two divisions "" one for project finance and the other for retail lending. This concept of setting up strategic business units (SBUs) will continue at least till Damodaran is at the helm.

"This arrangement helps in the focus of delivery system of individual business," as one needs different skill sets to meet different banking needs, he said.

Meanwhile with plans to take on the top two players in the banking sector IDBI commencing from October 1 as a banking entity, will start with a clean slate.

"Our non-performing asset ratio will fall from the current 15 per cent to less than one per cent, with the Rs 9,000 crore package from the government under the Stressed Asset Stabilisation Fund.

"This is a better option to transfer the bad assets to this fund instead of an asset reconstruction company (ARC). Had to sell my assets to an ARC, this would immediately reflected in my balance sheet a drop of 20 per cent in valuation," said Damodaran.

Speaking on the advantage to IDBI Bank, Damodaran said: "The bank post-merger need not lose sleep over the capital adequacy ratio."