Cabinet clears strategic sale of IDBI Bank
The Cabinet on Wednesday gave in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank in line with the Budget announcement earlier this year.
The central government and LIC together own more than 94% equity of IDBI Bank. LIC, currently the promoter of IDBI Bank with management control, has a 49.21% stake.
The Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi approved the strwategic sale of IDBI Bank, an official statement said on Wednesday. The extent of respective shareholding to be divested by the central government and LIC shall be decided at the time of structuring of transaction in consultation with the RBI, it said.
Finance Minister Nirmala Sitharaman while presenting the Budget 2021-22 had announced the privatisation of public sector banks (PSBs) as part of a disinvestment drive to garner ₹1.75 lakh crore.
“Other than IDBI Bank, we propose to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22,” she had said.
Insurance giant LIC has completed the acquisition of 51% controlling in IDBI Bank in January 2019.
“LIC’s Board has passed a resolution to the effect that LIC may reduce its shareholding in IDBI Bank Ltd through divesting its stake along with 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 policyholders,” the statement said.
This decision of the LIC board is also consistent with the regulatory mandate to it to reduce its stake in the bank, it added.
The statement further said it is expected that strategic buyer will infuse funds, new technology and best management practices for optimal development of business potential and growth of IDBI Bank and shall generate more business without any dependence on LIC and government assistance/funds.Resources through strategic disinvestment of government equity from the transaction would be used to finance developmental programmes of the government benefiting the citizens, it said.
Earlier in March, the Reserve Bank of India (RBI) had taken out IDBI Bank from the prompt corrective action (PCA) framework, subject to certain conditions and continuous monitoring.