A news item says that the board of directors of IDBI Bank will meet on October 4, 2018, to consider the preferential allotment of equity shares to the LIC, such that its shareholding in the bank, after such allotment of shares will increase to 51%. LIC has already conveyed its approval to such allotment of shares to the board of IDBI Bank. By virtue of such allotment of shares, for which LIC will invest another Rs.12000 crores in a bankrupt and mismanaged entity, it becomes the controlling owner of yet another financial institution. It is worth noting that incidentally, LIC is a prominent shareholder in almost all of India’s public sector banks, with virtually no return on its huge investments therein, till date.
LIC is no paragon of a model shareholder and its huge investments in banks have got little return for its policyholders. If you were to look at the colossal mismanagement and crisis at ILFS, where LIC is the main shareholder, with ownership exceeding 25%, it would be clear that LIC is not a vigilant and responsible shareholder. Despite being the dominant owner of ILFS, it kept no watch or check on its management, which freely frittered away huge amounts of public money. LIC’s track-record of being a large shareholder of a bank/financial institution is pathetic and justifies no more such investments, as it now proposes to, by investing an additional Rs.12000 crores in IDBI Bank. Such irresponsible investments and neglected monitoring thereof, only indicate that LIC destroys the wealth of its policyholders instead of nurturing it.
So while the wealth of LIC is being eroded due to such mismanagement, evidently due to government interference in its affairs, the larger issue is much more disturbing. It has to do with the manner in which the government mismanages banks and destroy public money and perpetrates its malpractices and misconduct. Take the case of IDBI Bank. In round one, the government was its owner and due to its constant meddling and interference, the bank went bankrupt, making the government investment worthless. After losing its giant investment, in round one of mismanagement, instead of calling it a day and liquidating such institution, which would happen if it were a private sector institution, the government has now handed over this rotten entity to LIC, to invest in, certainly laying the ground for round two of mismanagement and frittering away of public funds. And after round two of loot/plunder of public money is over, the government will finally merge a rotten IDBI Bank with other banks/FI, as we are witnessing in the case of Dena Bank.
There will thus never be a burial of an infected, mismanaged and bankrupt government-owned institution because that would bring out the misdeeds of the troika of corrupt netas, babus, bankers in the open. It will be passed on from one entity to another and then, to another, because the virus of political meddling, corruption and plunder which pervades our banking system, has to be kept alive for the powers that be.
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