Cabinet nod for privatisation of IDBI Bank

The Cabinet Committee on Economic Affairs (CCEA), on Wednesday, gave its in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank Ltd. However, the CCEA led by Prime Minister Narendra Modi further said in a statement that the extent of respective shareholding to be divested by the Centre and LIC would be decided at the time of structuring the transaction in consultation with the Reserved Bank of India.

The Government of India and the Life Insurance Corporation of India together own more than 94 per cent equity of IDBI Bank, with GoI holding 45.48per cent and LIC 49.24 per cent stake. The LIC is currently the promoter of IDBI Bank with management control and the government of India is the co-promoter.

The LIC board has passed a resolution to the effect that LIC may reduce its shareholding in IDBI Bank Ltd by divesting its stake alongside strategic stake sale envisaged by the government with an intent to relinquish management control and by taking into consideration price, market outlook, statutory stipulation and interest of policy holders.

The decision of LIC's board is consistent with the regulatory mandate to it to reduce its stake in the bank. "It is expected that the strategic buyer will infuse funds, new technology and best management practices for optimal development of business potential and growth of IDBI Bank Ltd and shall generate more business without any dependence on LIC and government assistance/funds," the government statement said, adding that resources through strategic disinvestment of government equity from the transaction would be used to finance developmental programmes of the government benefiting the citizens.

The RBI, in March this year removed IDBI Bank from the Prompt Corrective Action framework after a gap of nearly four years on improved financial performance.