Mumbai:
The employee unions of the Life Insurance Corporation, banking industry and IDBI Bank have staunchly opposed the proposed move facilitated by the government to allow Life Insurance Corporation to acquire majority stakes in debt-laden IDBI Bank.
The IDBI Bank Officers’ Union has threatened to go on a nationwide strike between July 16-21 for expressing their opposition against the proposed move.
The board of the insurance regulator IRDAI on Friday had cleared a proposal by which the LIC can pick up upto 51per cent in the IDBI bank For the LIC, it will be some kind of acquisition and not a strategic investment.The corporation is expected to invest Rs 10,000-13,000 crore in tranches in the NPA-mired state-run lender.
Given the precarious situation of NPA in IDBI bank and the intention of LIC to substantially raise its stake in the said bank, there is contagion risk on the policyholders precious savings, which will grossly impact the capability of LIC to serve its policyholder. In the past few years LIC has been struggling to raise the bonus on the policies, said Rajesh Sharma, general secretary, All India LIC Employees Federation in its letter to VK Sharma, chairman, LIC.
it is morally worth questioning whether IDBI bank, a lender with humongous bad loans close to a third of its book, makes for a good investment for LIC, asked Sharma.
“It should also be noted that no private investor has shown any interest in IDBI bank even though the government has wanted to sell equity for over two years now,’’ said Sharma.
Since nationalisation in 1956, LIC has been investing policyholders’ money in such a way that it first ensures the security of policyholders fund and then generates return on its investments, added Sharma.
“We are of the view that investing in IDBI bank will be injudicious,’’ he said.
Similarly C.H.Venkatachlam, general secretary, All India Bank Employees’ Association, in its letter written to the finance minister (Interim) Piyush Goyal has said that the Government should not use the present plight of the IDBI Bank created due to bad loans to reduce its stake to less than 51 per cent which would amount to shirking its commitment to the Parliament and the nation,
But in any case, Government should not use the present plight of the Bank created due to bad loans to reduce its stake to less than 51 per cent which would amount to shirking its commitment to the Parliament and the nation said
Further it is pertinent to point out that while investment is a part of LIC’s business, it cannot be that all loss making institutions are to be bailed out by LIC at the cost of the interest of the common people who are investors in LIC. It is also well-known that similar to banks facing huge bad loans,
LIC is also saddled with huge portfolio of non-performing assets/investments. Instead of taking stringent measures to address this vital problem, adding further investments in a bank which is facing huge bad loans and is making losses is not a fair proposition, said Venkatachlam.
“Government should adhere to its commitment to retain minimum 51% stake in the Bank and must come forward with adequate capital contribution as was done in the past,’’ said Venkatachlam.
If these bad loans are on account of bad and malafide decisions of the Executive of the Bank, they must be taken to task. If the accumulation of bad loans are due to change in economic scenario and such huge infrastructure loans are bad today, the Government must step in and provide additional capital, demanded Venkatachlam.