News Analysis

IDBI Bank bailout: LIC’s own bad loans needs a review

Radhika Merwin BL Research Bureau | Updated on June 26, 2018 Published on June 26, 2018

The insurer’s GNPA ratio stood at 5.74% as of December 2017

IDBI Bank’s troubles are well known. The state-owned bank sports the highest gross non-performing assets ratio (GNPA) within the industry---a worrisome 27.9 per cent as of March 2018. But bad loans do not seem to be a menace for banks alone. Interestingly, for Life Insurance Corporation (LIC) too—that has now been asked to bail out IDBI Bank--non-performing assets have been on the rise in recent years.

As of December 2017 (latest available information), LIC’s GNPA ratio stood at 5.74 per cent up from 5.2 per cent during the same period last year and 4.73 per cent as of March 2017. According to LIC’s 2016-17 annual report, the insurer’s GNPAs stood at about ₹18,173 crore out of a total debt of ₹3.84 lakh crore as of March 2017.

About five years ago, GNPAs for LIC stood at just 2.15 per cent (as of March 2013).

While LIC may not be in the lending business, it has been a big source of funds for companies as it picks up debentures and bonds from the bond market, besides holding equity stakes in many entities. Aside from its investments in debentures and bonds, LIC has also extended loans to the Centre, State governments, banks, financial institutions and companies, among others.

While LIC had a debt portfolio of ₹3.84 lakh crore in 2016-17—more than the loan book of many banks such as Bank of Baroda, Axis, Canara, Union Bank as of March 2017-- its loan book stood at about ₹1 lakh crore. Of this a chunk---around ₹77,000 crore were loan against policies.

Interestingly, for private insurers such as HDFC Standard Life, ICICI Prudential Life and Bajaj Allianz Life, GNPA ratios were nil as of March 2018.

Just as banks, the insurer also appears to be taking legal recourse to recover its bad loans. According to data published by Credit Information Bureau of (India), of the cases filed by banks and financial institutions with regard to loans above ₹1 crore, LIC had filed 15-odd cases against defaulters who owed the insurer about ₹1,600 crore as of December 2017.

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