Measuring Financial Distress of IDBI Using Altman Z-Score Model

Krishna Chaitanya V

The IUP Journal of Bank Management, 2005, vol. IV, issue 3, 7-17

Abstract: In a recent move, the Reserve Bank of India has approved the merger of IDBI (Industrial Development Bank of India) and IDBI Bank, which will happen in the month of October 2005. It is said that the merged entity would be the fifth largest bank in India after SBI (State Bank of India), ICICI (Industrial Credit and Investment Corporation of India), PNB (Punjab National Bank) and Canara Bank, in terms of total assets. The swap ratio is fixed at 1:1.42 and the government’s holding is all set to come down to 51.4% from the present 59%. Sources also revealed that the new entity would have two strategic units IDBI banking and IDBI development finance. But many experts do believe that this move of merging a weak organization with a stronger one is not a good strategy. In the light of the above, the present study attempts to examine the financial distress of IDBI using the Altman Z-score model. Based on the study results, the paper also focuses on suggesting the appropriate strategy.

Date: 2005
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