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TIN - LIC - IDBI Deal | Final Verdict & Analysis | Mains Answer Writing Points
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Aman Sharma is teaching live on Unacademy Plus

Aman Sharma
B.tech (ECE) , M.A(Sociology) YouTube - STUDY IAS Newspaper Analyst | Motivational Speaker Knowledge, like air, is vital to life.

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  1. TOPIC IN NEWS unacademy When an insurer buys a bank AMAN SHARMA


  2. TOPIC IN NEWS Aman Sharma VVERIFIED Follow B.tech (ECE), M.A(Sociology) The STUDY IAS guy. Knowledge, like air, is vital to life. Like air, no one should be denied it. SCIENC & TECHNOLOGY CURRENT AFFAIRS INDIA SINCE INDEPENDENCE COMPLETE COURSE INDIA SINCE INDEPENDENCE BIPAN CHANDRA 2018 By- AMAN SHARMA unacademy By Aman Sharma By Aman Sharma (Hindi) Complete Course India Since Independence Bipan.. (Hindi) May 2018-Science and Technology Current Affairs for.. 6 Lessons 5 Lessons <l AMAN SHARMA


  3. What does Life Insurance Corporation of India (LIC) gain from taking a majority stake TOPIC IN NEWS Rubble of toxic in IDBI Bank? If the government has its way, LIC's customers will find their money flowing into the worst public sector lender, IDBI Bank. Insuring life of banks LIC holds stakes in the most toxic of public sector lenders thus exposing itself to bad assets -LIC's stake (in %) 14 12 10 8 6 crore) Gross NPA stock (in crore, right-hand scale) IDBI Bank's net loss (in Gross NPA" ratio (%) Banks under RBI'S PCA 2016 2017 2018 50000 3,664.8 5,158.1 8,237.9 30000 10000 0 Allahabad Bank of Corporation IDBI Bank Oriental Bank United Bank Maharashtra Ltd f Commerce Bank of 21.3 India Bank of Central Bank Dena Indian Overseas uco Bank of India Bank Bank India prompt corrective action Source: Stock exchange filings 28 "Non-performing assets AMAN SHARMA Source: Bank results


  4. TOPIC IN NEWS LIC - IDBI Nothing, say analysts. It has just helped the government provide much-needed capital to the beleaguered lender. LIC "IDBI is a bank which is in tatters. This is nothing but a bail-out for the lender without any gains for LIC. As things stand now, it will take at least three years for IDBI to attain some stability which means LIC has to bear the losses for this investment and potentially provide more for the years to come. It is difficult to find any logic for this investment," said Udit Kariwala, senior analyst, financial institutions, IndiaRatings . fra nH mm LIFE INSURANCE CORPORATION OF INDIA AMAN SHARMA


  5. LIC IDBI TOPIC IN NEWS ."This deal looks like a bail-out for IDBI Bank without taking into consideration millions of policy holders who have invested their hard-earned money to seek insurance protection. LIC can support the market but owning majority stake in a bank with high NPAs without management control and cross holdings with other banks do not set high standards of governance," said Kuntal Sur, financial services partner and head of risk at PwO. IDBI Bank is among the worst performing public sector lenders over the past two years. In the quarter ended March, the bank posted a loss of Rs 5,662.76 crore, higher than the Rs 3,199.77 crore loss posted in the quarter ended March last year. The percentage of net NPAs have jumped to 16.69 per cent in March quarter of 2018 from 13.21 per cent in the fourth quarter of March 2017. Gross non-performing assets have jumped to Rs 55,588.26 crore against Rs 44,752.59 crore on year-on-year basis. AMAN SHARMA


  6. TOPIC IN NEWS LIC - IDBI RBI norms state that a bank cannot own more than one life insurance business. This rule seems to have been challenged due to this deal as LIC could now also own IDBI Federal Life Insurance. There are questions on what will happen to the insurance company's stake in other banks. "One could argue that LIC could use a banking partner to penetrate the growing insurance market better. But if you look at the sheer scale and size of LIC's network even that logic does not work. There are simply no synergies in this deal. At best, this is a stop-gap arrangement to save government coffers before a possible consolidation of public sector lenders," said Kalpesh Mehta, partner at Deloitte India. IDBI Bank stock rose 10.02 per cent to end at Rs 54.90 on the BSE on Friday. The government together with LIC owns a round 92 per cent in the bank which means the floating stock is just above 8 per cent, preventing fair valuations for the stock. AMAN SHARMA


  7. LIC IDBI TOPIC IN NEWS LIC would fork out up to and also with differential voting rights. The Banking Regulations Act caps voting rights to 15% of shareholding. 13,000 crore for a 51% stake without management control . .IDBI Bank made a cumulative loss of 13,396 crore over fiscal years 2015-16, 2016-17 and 2017-18, has close to 55,000 crore in toxic assets and another 60,000 crore that could turn non-performing. .The lender's recovery rates are horrible and write-offs are through the roof. Long story short, it will need large sums of capital for the next three years just to exist at the very least. It's a rescue mission and LIC cannot dream of making money. In fact, it can only sink in more money for the next few years. Indeed, the life insurer seems to be the government's preferred white knight for rescue missions. It has the highest stake in perhaps the worst of the banks, having participated in capital infusions before. . AMAN SHARMA


  8. TOPIC IN NEWS LIC - IDBI LIC holds stakes in all the troubled public sector lenders, averaging 8% in each. Its stake is lowest-below 5%-in Indian Bank, Bank of Baroda and United Bank of India. These banks account for roughly 8% of the non-performing assets (NPA) stock of the country's banking system. The six banks in which LIC holds over 10% stake account for quarter of the system's NPA stock. . . . .Simply put, LIC is exposed to a huge chunk of the banking system's bad assets. If this doesn't make it a bad bank, what will? The Reserve Bank of India has already flagged the risks to the banking system from its dependence on the insurer's funds. AMAN SHARMA


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