Ailing public sector bank (PSB) IDBI Bank, under its new owner LIC of India, has a new plan of action. The bank’s new promoter, which is also on the lookout for a full-time Chairman, is aiming to not only turn the corner, but also emerge as a ‘one-of-its-kind financial conglomerate’ in the country.
First up as part of the multi-pronged strategy is to professionalise the board. The bank has already inducted two new eminent professional independent directors (Sanjay Gokuldas Kallapur, from Indian School of Business and Deepak Singhal, former Executive Director, Reserve Bank of India) and is also considering re-appointing current MD and CEO Rakesh Sharma for another three years.
The new board will be entrusted with the responsibility of charting out a fresh growth strategy for the bank besides revamping the corporate governance structure to ensure best-in-class business practices. To further strengthen the bank’s management, IDBI is in the process of appointing two new Deputy Managing Directors. But, unlike in the past when internal candidates were elevated based on experience, this time around, the appointments are being made through open competition from the market. LIC’s chairman has been appointed as the non-executive chairman of IDBI, but the question of strategy continuity remains ambiguous until it gets a full-time chairman.
Second, IDBI has started reviewing its policies including credit, investment and internal processes, risk management practices, etc., with the help of consultants. With an intent to garner better synergies from banking and insurance veritcals, the long-term strategy includes common investment strategy, use of other resources like real estate, commercial and residential space, IDBI’s branches, premises and ATMs, digital marketing, rationalisation of the common subsidiaries in mutual funds, and life insurance. “With this strategic alliance, the bank stands to gain immensely as it will be able to augment its retail business, thereby de-risking its business portfolio and ensuring increasing of other income/operating profit, NIM and substantial increase in CASA. The Bank has already recorded noticeable improvements in CASA ratio to 38 per cent as on Dec 31, 2018,” it said.
To realize the full potential arising out of these business synergies, a joint task force has been constituted, chaired by the senior management of IDBI Bank and LIC, to chart out the future roadmap, both for the Bank as also for the associate companies. Additionally, a Working Group, has been created to carry forward the initiatives identified for synergy and to effectively implement the decisions taken at the management level, it added.
IDBI Bank and LIC, through its collective network of branches, offices and workforce, have started leveraging their mutual business synergies. As a starter, IDBI’s Board approved appointment of LIC as a corporate agent under bancassurance. Among the areas of synergies identified for short-term include selling LIC policies through IDBI Bank branches, management of cash and other premium receipts of LIC through IDBI’s branches, enabling the technical wherewithal available in both the Bank and LIC for offering digital solutions to both, the policy holders of LIC and customers of IDBI Bank.
IDBI Bank sets in place turnaround plan
First, the bank is in the process of professionalising the board, having appointed two new eminent professional independent directors
IDBI Bank has also started reviewing its policies including credit, investment and internal processes, risk management, etc., with the help of consultants
IDBI Bank and LIC, through its collective network of branches, offices and workforce across India, have started leveraging their mutual business synergies