Govt asks IDBI to review mortgage arm sale decision
The finance ministry has asked public sector lender IDBI Bank to explore other options before finalising plans to sell its mortgage finance arm, IDBI Home Finance (IHFL).
According to sources, the finance ministry had noted three options available to IDBI Bank on its mortgage financing arm. While one was to merge IHFL with itself, the second was to sell the mortgage company. The third was to periodically purchase the portfolio of IHFL to free capital for further business. This would be similar to the model followed by ICICI Bank for its subsidiary, ICICI Home Finance.
“It appears the management has examined only the first two options. It has not considered the third option at all,” the finance ministry said in a communication to IDBI Bank. It advised the bank to explore all three options afresh before putting a proposal to the IDBI board for a decision.
In August this year, IDBI Bank had revived plans to sell its subsidiary and had approached the finance ministry with a fresh request. In the interim, it had infused Rs 20 crore into IHFL to shore its capital base to meet the National Housing Bank-prescribed capital adequacy norms.
IDBI Bank Chairman Yogesh Agarwal said, “We are still in discussions with the Government of India, after which we will take a final view on the matter.”
When asked if the bank would consider re-evaluating IHFL, given the changed market conditions from the time of bidding and the capital infusion, Agarwal said the bank was yet to decide this.