Cabinet DecisionsLegislation Updates

Union Cabinet has approved the Infusion of Rs 4,557 crore by Government in IDBI Bank.

It will help in completing the process of IDBI Bank’s turnaround and enable it to return to profitability and normal lending, and giving Government the option of recovering its investment at an opportune time.

IDBI Bank needs a one-time infusion of capital to complete the exercise of dealing with its legacy book. It has already substantially cleaned up, reducing net NPA from peak of 18.8% in June 2018 to 8% in June 2019. The capital for this has to come from its shareholders. LIC is at 51% and is not allowed to go higher by the insurance regulator. Of the Rs. 9,300 crore needed, LIC would meet 51% (Rs. 4,743 crores). Remaining 49%, amounting to Rs. 4,557 crore, is proposed from Government as its share on a one-time basis.

After this infusion, IDBI Bank expects to be able to subsequently raise further capital on its own and expects to come out of RBI’s Prompt Corrective Action (PCA) framework sometime next year. This cash neutral infusion will be through recap bonds i.e. Government infusing capital into the bank and the bank buying the recap bond from the Government the same day, with no impact on liquidity or current year’s Budget.

Background:

Following Cabinet’s approval in August 2018, LIC acquired 51% stake in IDBI Bank. Government continues to be a promoter and holds 46.46% stake.

The financial parameters of IDBI Bank have improved considerably during the last year:

  • CRAR has improved from 6.22% as on 30.9.18 to 11.58% as on 31.3.19.
  • Net NPA ratio reduced from 17.3% as on 30.9.18 to 10.11% as on 31.3.19 and further to 8.02% as on 30th June 2019
  • Provision Coverage Ratio (PCR) improved from 69% (30.9.18) to 83% (31.3.19) and further to 88% on 30th June 2019
  • Synergy with LIC has enabled access to 29 crore policyholders base spread over 3184 branches and also to 11 lakh agents and 2 lakh employees of LIC.
  • Rs.500 crore revenue for FY 2020 and Rs. 1,000 crore from FY 2021 onwards projected from LIC Synergy.
  • Sale of insurance kick-started in March 2019 with Rs. 160 crore premium. This momentum has continued with over Rs. 250 Cr premium collection in first four and a half months of this year. FY 2019-20 target is Rs. 2000 crore of premium and Rs. 200 crore revenue.
  • Additional business anticipated is Rs. 5,000 crore (Housing loan, Auto loan, personal loan) by leveraging LIC agents’ network.

Cabinet

[Press Release dt. 03-09-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Telecom Disputes Settlement and Appellate Tribunal (TDSAT): The Coram of Justice Shiva Kirti Singh (Chairperson) and A.K. Bhargava (Member) while disallowing this Cyber Appeal directed the appellant to pay Rs 1 lakh to the respondent within 30 days from the date of the order pronounced.

In this instant matter, respondent/complainant operated savings bank account with the appellant. The respondent lost about Rs 81,700 due to unauthorized transaction after he had clicked a link provided in an e-mail alleged to have been sent by the appellant bank. The respondent provided confidential information through that link. Thereafter, the respondent filed a complaint whereby which the appellant froze two accounts in its bank. By this time, the money had already been withdrawn from these two accounts. Pursuant to this, an internal inquiry was held and afterwards a formal police complaint was lodged by the appellant.

Not satisfied with the recourse taken by the appellant, the respondent filed a complaint before the Adjudicating Officer. The Adjudicating Officer awarded total compensation of Rs 1 lakh to the respondent. Aggrieved by the order of the Adjudicating Officer, the appellant preferred this instant appeal.

Sumnesh Kumar, Counsel for the appellant submitted that the Adjudicating Officer failed to consider the gross negligence of the respondent. The appellant had taken all possible steps to ensure that no untoward incident like this happens. Appellant claims to have educated its customers on phishing through emails/phones, etc.

Adjudicating Officer relied upon Section 43 read with Section 85 of the IT Act, 2000. Section 43 provides for compensation. Section 43-A deals with Compensation for failure to protect data.

The Court observed that some phishing frauds may be beyond the control of concerned banks. But, the domain name in the alleged e-mail which led the respondent to divulge all his details was idbi.co.in which is one of the registered domain names of the appellant Bank. This could be security lapse or done through connivance. It was further observed that while the appellant failed to provide reasonable security to avert such communication bearing its domain name, it merely passed on the onus to the respondent for being negligent. The Court in agreement with the Adjudicating Officer found the appellant guilty and liable for the violation of Section 43 read with Section 85. In addition to this, the appellant was also found to be guilty of the violation of Section 43-A since it was found that the appellant was negligent in implementing a robust security system.

Moreover, the Court pointed out a similar case of Umashankar Sivasubramanian v. ICICI Bank, Civil Jurisdiction Petition No. 2462 of 2018 having the same decision.[IDBI Bank v. Sudhir S. Dhupia, 2019 SCC OnLine TDSAT 226, decided on 13-08-2019]