IDBI Bank is merging its home mortgage arm with itself after scrapping a previous plan to sell the unit. A merger of the mortgage unit with the parent will rule out any immediate possibility of the state owned lender reviving plans to sell the business and will make IDBI a more potent force as a large lender.

IDBI Home Finance had grown its home loan book by 15% to Rs 3,537 crore with net profit of Rs 52 crore for the year ended March’10. It also reduced its net NPAs from 0.55%(March 31, 2009) to 0.34%(March 31, 2010).

The bank had scrapped plans to sell the housing finance company reportedly due to differences with the government over the stake sale. This was after kicking off the process inviting bids around one and half years back that attracted at least three bidders: Tata Capital, Religare and Dewan Housing.

Dewan Housing had become the highest bidder agreeing to pay over Rs 300 crore almost 50% more than the other two suitors.

But the proposed sale of the unit was stalled as the government nominee in the board sought deferment and thereafter the plans was pretty much shunted. The bank was reportedly looking at both the options of either retaining the mortgage unit as a wholly owned subsidiary or merge it with itself.

IDBI had acquired the business from Tata Home Finance almost seven years ago when the Tatas wanted to quit the home finance market.

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