IDBI Home Finance will be dissolved following the merger of Industrial Development Bank of India with IDBI Bank. Home loans will be handled solely by IDBI Bank, which will function as a strategic business unit.
This was told to the employees of the bank on Monday when M Damodaran, chairman and managing director, IDBI, met the bank staff to allay their apprehensions over the merger.
In response to the possible conflict of interest that would arise with IDBI Home Finance also offering home loans, Damodaran said the home loan financing entity would cease to exist. Earlier, IDBI had bought the Pune-headquartered Tata Home Finance as it wanted to branch out into home financing.
The financial institution acquired the entity in September last year, two years after P P Vora took over as IDBI chairman, after his stint as the chief of National Housing Bank.
Meanwhile, IDBI Bank has been growing at a rapid pace in the home loan segment, though a relatively new player.
Of its total retail asset book of Rs 3,891 crore (Rs 38.91 billion) in the first quarter of fiscal 2005, the home loan portfolio accounted for Rs 3,297 crore (Rs 32.97 billion).
This reflects an increase of 94.8 per cent against Rs 1,692 crore (Rs 16.92 billion) of home loan assets in the corresponding quarter last year.
Damodaran emphasised that he would institutionalise the SBU concept to protect the interest of IDBI Bank employees, thereby taking care of the human resources issue.
He further reiterated the fact that the merger was in the interest of the bank, as it would now have the necessary capital to grow and branch out.
The stock market discounted the merger news positively when the stock hit the upper circuit on day one.
The IDBI Bank employees, however, are still skeptical about the longevity of the SBU concept. Many feel with the institutionalisation of the bank into a public sector culture, it will be difficult to attract talent.
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