LIC bailing out IDBI Bank

This refers to the editorial ‘Ill-advised’ (June 28). The Centre has often taken the Life Insurance Corporation of India (LIC) for granted, whenever the issue of bailing out some public sector units surfaced. The Centre’s move to again force the LIC, which has already invested in the equity shares of IDBI Bank to the extent of 15 per cent, to rescue the NPA-ridden bank by subscribing to its equity shares is like an act of deliberately pushing the rescuer into danger. This kind of bail out is counterproductive: one, LIC would lose its competitive edge as the most trusted entity in the life insurance sector; and, two, there may come a time when the government will look to another entity to bail out the LIC itself — currently having investment portfolios in as many as 12 capital-starved public sector banks.

Cuddalore, TN

There was a time when Industrial Development Bank of India (IDBI) occupied an unique place as a top financial institution in the country that helped set up big industries and establish many subsidiaries, the prominent among them being Technical Consultancy Organisations (TCOs) and Small Industries Development Bank of India (SIDBI).

But, unfortunately, due to negligence and poor handling of the bank’s portfolios over the years, IDBI was converted into a commercial bank for survival.

Although the government has already infused ₹10,600 crore capital into the bank (over and above the ₹2,200 crore added between FY15 and FY17), the lender has incurred huge losses and requires massive capital infusion again. LIC has been reportedly asked to subscribe to the shares issued by IDBI Bank for infusing funds into it. Though a good move, the question is whether the ailing bank will ever improve its track record. Will it be vigilant in sanctioning loans in the future?

Kolkata

This is with reference to ‘Why insure deposits of public sector banks?’ (June 28). All banks are required to be registered with the DICGC and to pay premium as prescribed. At present, the rate of premium is the same for all banks. What can be done is to have differentiated premium, based on the risk profile of banks, irrespective of whether they belong to the public or private sector. However, the fate of the DICGC itself is uncertain with the Financial Resolution and Deposit Insurance Bill, 2017 under consideration of the Joint Parliamentary Committee of Parliament. The Bill seeks to replace DICGC with ‘Resolution Corporation’. The JPC has already had 12 meetings and is scheduled to submit its report by the last day of the monsoon session of Parliament.

Jaipur

The report on ‘PET or glass bottles for medicines?’ (June 28) brings forth the dangers and consequences of leaching from plastic bottles used in packaging of medicines. Thankfully, there are efforts to study the issue in an ‘even handed and scientific’ manner by experts. Quite likely, such reports and analyses would conclude that when appropriate grade plastic raw material is used, the dangers are minimal or non-existent. However, as the report points out, the issue is always of effective implementation. There is simply no way to ensure that plastic bottle manufacturers use the right/safe grade of plastic. While medicine manufacturers have the wherewithal to check the quality of the incoming container supplied, would all be willing to insist on high grade (therefore high priced) packaging if cheaper (therefore non-compliant) version were to be offered? Let us hope so.

Pune

This refers to ‘GST has positive impact on overall biz: CFO survey’ (June 28). The fact of the matter is 77 per cent of the CFOs believe that GST has had a positive impact on revenue is testimony to the right step taken by the government. However, certain sections of people, especially politicians, denouncing the government over the GST issue is disconcerting. Every reform has teething trouble, and the same is the case with GST.

Bengaluru

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