IDBI debuts as a bank

New entity to have balance sheet size of Rs 80,000 crore and a network of 200 branches.

IDBI Ltd Chairman M Damodaran said his bank would soon join the ranks of the larger banks in India. "In the short term, we will be the number two bank in the Indian financial system," Damodaran said at a press conference in Mumbai today. IDBI today became a deemed banking company.

Damodaran said the merger with IDBI Bank would be completed in the course of the current financial year. The merged entity would have a balance sheet size of Rs 80,000 crore, with a network of over 200 branches and 300 ATMs.

He also dropped broad hints at further acquisitions, saying, "It is possible that we could grow on inorganic lines after the merger with IDBI Bank. We would be looking at the universe of the 19 public sector banks."

IDBI today deposited Rs 2,400 crore as a cash reserve ratio liability with the Reserve Bank of India and said that though it had a five-year holiday for meeting the statutory liquidity ratio (SLR) norms, it had already built up a portfolio of Rs 3,000 crore and was looking at a target of Rs 12,000 crore in 18-24 months.

The chairman said the gap between IDBI and the larger banks could be bridged even through faster organic growth. "Sanctions in the last six months have touched Rs 5,000 crore and Rs 1,200 crore worth of projects have been cleared in the span of two days," he pointed out. Damodaran noted that corporates, both large and mid-sized, had firmed up expansion plans and several projects were in the pipeline.

On the liabilities side, Damodaran said the weighted average cost of deposits would be brought down by one percentage point over the next six months from around 9 per cent.

The chairman explained that the entire funded exposure of Rs 1,200 crore to the Dabhol power company had been transferred to the Stressed Assets Stabilisation Fund (SASF) while the non-fund exposure of Rs 900 crore remained on IDBI's books.

The gross value of non-performing loans transferred to the SASF was Rs 12,600 crore while the net value was Rs 9,000 crore. Damodaran said some non-performing loans were being held on IDBI's books since some of them had been fully provided for. In other cases, it was felt that the bad loans could be recovered shortly.

On priority-sector lending, the chairman observed that the norms were not statutory but a directive of the RBI. "Since Parliament finds development finance a priority, I think priority sector norms will be redefined and as soon as the new norms are announced we will be fully compliant." IDBI Ltd's infrastructure advances would be considered as part of priority sector lending.

Damodaran said the bank would not mobilise current and savings accounts or disburse retail loans since it would be duplication of products offered by IDBI Bank.