In a bid to “identify and address the existing lacunae” among other issues, IDBI Bank is planning to appoint a consultant to chalk out a turnaround plan to explore ways for reducing costs and maximising its top line, the lender said in a request for proposal (RFP). According to the document, IDBI Bank is exploring avenues to identify areas and strategies for “cost containment and revenue maximisation, leading to sustainable growth and profitability for the bank”.
The bank, it said, intends to formulate a strategic programme to focus on four areas – revenue enhancement, cost control & reduction, asset productivity and overall programme management coordinating across multitude of initiatives. “The project is envisaged for total duration of nine months from the date of appointment. The bank, at its discretion, may continue the services of the consultant for partnering for a further period of not exceeding nine months,” it said.
The plan includes comprehensive real estate strategy with asset divestitures or lease back arrangements to identify reasons for decline in employee productivity and recommend measure to address it through policy intervention and dedicated training programmes, among others. Last week, Moody’s downgraded IDBI Bank citing quality issues and heightened risk to the lender’s solvency. The Mumbai-headquartered bank, which posted a net loss of Rs 3,200 crore for the March quarter against Rs 1,736-crore loss in Q4FY16, has also been downgraded by Crisil.
On May 9, the RBI had initiated a prompt corrective action plan on the lender given the high net non-performing assets (npa) ratio – 13.2% at the end of March 2017 – and negative return on assets (RoA) of -1.39%. The central bank placed restrictions on dividends to be distributed and profits to be remitted and asked it to maintain higher provisions.
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The bank’s stressed assets (non-performing loans plus standard restructured loans) ratio stood at 29%, sharply higher than 19% in March 2016. The lender also reported its highest-ever gross non-performing asset (NPA) ratio of 21.25% in Q4 FY17. Meanwhile, IDBI Bank said in a statement it had crafted a “comprehensive turnaround strategy with a focus on augmenting the capital base and recovery from NPAs”.
MD & CEO Mahesh Kumar Jain said the bank would prioritise recoveries and check further slippages. Jain said additions to the corporate loan book would be restricted and the lender would focus on retail and priority sector assets. At present, a big chunk of loans is to corporates while retail assets constitute just 43% of its total advances.