B Sriram the Managing Director at SBI has resigned.
Sriram, according to several sources is expected to join as the Chief Executive of debt-laden IDBI bank.
His appointment at IDBI assumes significance considering state-owned insurer LIC (Life Insurance Corporation of India) had been reported of talks where the insurer could acquire a majority stake in IDBI.
Sriram had reportedly been selected to head IDBI as its CEO for a period of three months. The development came in last week, after MK Jain, retired as the CEO at the bank to join Reserve Bank as a deputy governor.
Sriram's resignation has been sent to a Cabinet' Appointments Committee for approval. A final call is expected soon.
Sriram who has had the longest tenure as a managing director of a public sector bank has had wide experience in corporate banking and handling stressed assets. Sriram who joined the bank in 1981 as a probationary officer has had a three decade long career across various positions including the SBI Singapore office, and the MD of State Bank of Bikaner and Jaipur.
Will this deal materialize?
If the talks of a deal between LIC and IDBI bank materializes, it would be the insurer's first foray into the banking sector.
An insurer, for those interested, issues nearly 20 million policies every year. Speculators believe that LIC could opt for a subsidiary model for its investments in IDBI bank. Financial analysts suggest that this move could commence the privatisation of IDBI bank.IDBI Bank was setup in 1964, and until late 2000 was considered as a well run bank. But in recent times, rising bad loans have relegated it to a bank known for rising Non-Performing assets. Since late 2017, the bank has been put on a prompt corrective action plan (PCA) by the Reserve Bank.
The deal with LIC would enable the bank to correct its books. The deal is estimated at Rs 14,000 crores, however an exact deal value is yet to be ascertained.
According to reports, the bank has said that it would put up a massive Rs 21,397 crores of bad loans on the block to speed recoveries. And this amount is from corporate sector alone. The bank reported gross NPAs at a staggering Rs 55,588 crores or nearly four times the Nirav Modi-PNB fraud, for the quarter ending March 2018.
If the deal materializes the Bank could shed its image of a public sector bank.
Although Finance minister Arun Jaitley has not been very confident on the strategy of privatising public sector banks, he has been quoted with a positive intention to privatise IDBI Bank.
"The government will take it forward and also consider the option of reducing its stake to below 50%," he said during a budget announcement, referring to an intention to dilute government stake from the bank. According to IDBI bank's website, the government owns 80.96% stakes in the bank.
There has been a huge debate on whether LIC, a successful public enterprise should invest multi-crores in IDBI, which at the moment looks like a sorry state of affairs with burgeoning debts. But even amid this debate, an IRDAI (Insurance Regulatory and Development Authority of India) approval is expected to bring life for IDBI.
The regulator is expected to provide its thoughts on the deal by end of Friday.
The bank's scrip was trading 3.85 points or 7.72% up at Rs 53.75 a share on the Bombay Stock Exchange at the time of writing this story.