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Letter to BS: Deal between LIC and IDBI Bank raises many questions

IDBI Bank most certainly does not qualify to be bought over by LIC

Business Standard 

Apropos “In RBI’s Court” (July 3); appreciate the plain speak. This editorial should set the (RBI) thinking — and take a prudent decision in the matter. It is indeed shocking that of India (LIC) has been given a go ahead in this matter.

is very sick. Losses of Rs 25 billion — and counting — in one year is frightening. As on date, the total loss figure may well be around Rs 70 billion. That their “capital adequacy ratio is perilous” — despite the government having infused Rs 100 billion makes it terminally sick. Palming off a sick institution to a state-owned insurance company would be unjust. It could well be the last straw for LIC, before the venerable institution itself starts going downhill. already seems to have become a favourite parking place for government-owned sick assets under the thin veil of disinvestment.

Holding stakes in 21 and losing in 18 of them in the last two-and-a-half years should be reason enough for to not buy any more of rotten eggs. With loud and clear signs of failure, most certainly does not qualify to be bought over by — arguably the most secure institution for tens of millions of middle-class Indians. Acquiring this “asset” is not only an unnecessary burden for LIC, it is a sure recipe for disaster. Mounting loses, 36 per cent non-performing assets, consensus that it will not be able to turn around in the near future; what more damning forecast does the LIC need to stay far away from this disaster.

The must not only turn down the suggestion assertively, it must also pass strictures on Insurance Regulatory and Development Authority of India for having cleared this proposal. That LIC’s insolvency ratio has fallen from a healthy 2.27 to barely above the minimum requirement of 1.5 — in less than nine years — is an obvious proof of what misadventures it has undertaken, or has been forced to undertake. They must not be allowed to continue on this disastrous path.


Krishan Kalra Gurugram

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First Published: Tue, July 03 2018. 21:01 IST
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