LIC-IDBI Bank deal: mistake or strategy?

InGovern’s Shriram Subramanaian believes that policyholder’s money should not have been channelled into IDBI Bank. “Why should LIC policyholders’ money be used to invest in a bank that is in trouble? It is well known that IDBI Bank has had multiple problems,” he says. “Addressing the issues of IDBI Bank is a different thing, but pumping in policyholders’ money is not justified.”

Subramanian says merging IDBI Bank with another PSU bank was a route that could have been explored instead of relying on LIC to jump in and bail out the bank in trouble. He adds that the non-performing assets and governance issues plaguing PSU banks as a whole needs to be addressed more effectively. “Unless there is true governance reform, there is no real development in the addressing of core issues that impact PSU banks,” he points out. “The government must distinguish its role of manager of a PSU bank, shareholder and policy maker. It should transfer all its shareholdings to a bank holding company to ensure that deals like this are carried out in a more transparent manner.”