IDBI bank to merge home loan arm with itself

State-run IDBI Bank on Thursday said it will merge its Pune-based wholly-owned home-loan subsidiary IDBI Homefinance with itself to consolidate its home loan business and gain market share.

The IDBI Bank board, which in Mumbai, gave its in-principle approval for the merger. The move is aimed at consolidating its home loan business which is currently being rolled out through the bank's own housing finance division as well as IDBI Homefinance (IHFL).

"It did not make any sense to us (continuing the subsidiary as it is). Hence the decision to merge," IDBI Bank executive director and retail banking group head R K Bansal told a news agency.

IDBI Bank took over the erstwhile Tata Home Finance in September 2003 and renamed it as IHFL as a pure-play home loan player. As of end March 2010, IHFL had an outstanding home loan portfolio of Rs3,537 crore as against Rs3,089 crore in FY09. IHFL's net NPAs stood at 0.34 per cent and capital adequacy ratio at 13.31 per cent. IHFL is present in 18 centres and over 150 employees.

Earlier, IDBI Bank was actively looking at selling this and had shortlisted seven potential buyers including Dewan Housing. However, the deal did not materialise. "It (the sale plan) did not work out. So we decided to merge," Bansal said.

The bank has not fixed any time-frame to complete the merger but will soon initiate the process, Bansal said.

Asked whether the employees of IHFL will be absorbed in the bank, Bansal said, "Those things have to be worked out," but hinted that the 150-odd staff could be retained.

IDBI Bank, which posted a net profit of Rs251 crore in the June quarter, which was up 46 per cent from Rs172 crore in the year-ago period, is expecting a capital infusion of above Rs 3,119.04 crore from the government soon, IDBI Bank chief financial officer P Sitaram said earlier in the day.