InvestorQ : Why have banks like HDFC, SBI and ICICI been selling stakes in their insurance arms in the last few days?
Moii Chavate made post

Why have banks like HDFC, SBI and ICICI been selling stakes in their insurance arms in the last few days?

Answer
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Sam Eswaran answered.
3 months ago


Large Indian banks are gearing up to fill up their coffers as an insurance against a spike in NPAs after the EMI moratorium is lifted in August. Apart from the hit on asset quality, the banks will also look to shore up their capital base to capitalize on any major growth opportunities that may arise in the post-COVID scenario.

Credit Suisse has estimated Indian banks will need $20 billion in fiscal 2021. For example, SBI will seek approval to raise Rs.20,000 crore while HDFC Bank plans to raise Rs.50,000 crore. Smaller private banks are also looking to substantially shore up their capital base. But another major source of funds appears to be monetizing their insurance arms.

For example, ICICI Bank sold partial stake in both its general and life insurance business for Rs.3100 despite having comfortable capital adequacy of 16.1%. Earlier in June, SBI also sold a 2.1% stake in SBI Life for approximately Rs.1525 crore. HDFC has also sold a stake in HDFC Life as insurance business has been one of the biggest beneficiaries of the COVID-19 and hence it has been the easiest to monetize in these tough market conditions.