IDBI Bank hires BCG to advise on turnaround plan

Public sector lender IDBI Bank has hired the Boston Consulting Group (BCG) to accelerate a turnaround programme and improve its financial performance.

M K Jain, the bank’s managing director, said: “BCG will assist us to identify areas for cost containment and revenue maximisation.” IDBI has had mounting losses and due to the size of its non-performing loans, is under the Reserve Bank of India’s Prompt Corrective Action plan.

The bank expects to identify and address existing gaps, capitalise on core strengths and improve products and processes with BCG’s help, it said on Tuesday. The focus will be on four areas - revenue enhancement, cost control and reduction, asset productivity and overall programme management.

BCG had advised IDBI in 2001, when the latter was a development finance institution, on transiting to become a universal bank.

IDBI has also decided, said an executive, to appoint a human resource advisor and information technology experts, to improve its systems.

It has tepid revenue growth at a time when the amounts set aside to cover for bad loans are escalating. It is also struggling in meeting the capital adequacy norms. The net loss was Rs 853 crore for the quarter ended this June, on a sharp rise in provisioning for bad loans and a fall in net interest and other income. Gross non-performing assets rose to Rs 50,173 crore (24.1% of the total), from Rs 27,275 crore (11.9%) a year before and Rs 44,752 crore (21.25%) at the end of March this year.

IDBI postpones stake sale in CCIL 

IDBI Bank has postponed the sale of its remaining 2.5% stake in Clearing Corporation of India (CCIL), in the hope of getting better valuation. While the bank had sought an Expression of Interest for the stake till September 25, it has now extended this date till October 13.

It has already sold 5% stake in CCIL and a sizeable stake in Small Industries Development Bank of India, or Sidbi. However, it hasn’t disclosed the amount it has raised in these transactions or to which entity bought the stake. 

CCIL was set up in 2001 to provide guaranteed clearing and settlement functions for transactions in the money, government securities, foreign exchange and derivatives markets.