The government on Wednesday cleared a proposal for strategic disinvestment of IDBI Bank Ltd, boosting efforts to meet its ambitious Rs.1.75 lakh crore disinvestment target for this fiscal year.
The proposal was approved by the Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi. It involves the sale of a majority stake in the bank jointly by the government and Life Insurance Corporation of India (LIC), along with management control.
The Union government and LIC own 45.48% and 49.24%, respectively, in IDBI Bank, giving them a combined stake of more than 94%. LIC is currently the promoter of IDBI Bank with management control after the government sold its majority stake to the state-run insurance giant in 2019.
However, the government and LIC may not fully sell their stakes and instead retain minority holdings post the strategic disinvestment. “The extent of respective shareholding to be divested by GoI and LIC shall be decided at the time of structuring of transaction in consultation with the RBI,” the cabinet secretariat said in a statement.
A finance ministry official said on condition of anonymity that the government will appoint advisers for the transaction and, in due course, issue the preliminary information memorandum inviting expression of interest for the stake sale.
IDBI Bank on Monday reported a full-year profit for the first time in five years at Rs.1,359 crore for 2020-21. The lender had reported a loss of Rs.12,887 crore in fiscal 2019-20.
{{/usCountry}}IDBI Bank on Monday reported a full-year profit for the first time in five years at Rs.1,359 crore for 2020-21. The lender had reported a loss of Rs.12,887 crore in fiscal 2019-20.
{{/usCountry}}In the March quarter, the bank, which came out of the RBI’s prompt corrective action framework in March, reported a nearly four-fold jump in net profit to Rs512 crore due to tax refund and higher net interest income. It had a year-earlier net profit of ₹135 crore.
“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.
The Centre expects a buyer to infuse funds, new technology and best management practices for optimal development of business potential and growth of IDBI Bank and generate more business without any dependence on LIC and government assistance. “Resources through strategic disinvestment of government equity from the transaction would be used to finance developmental programmes of the government benefiting citizens,” the statement said.
The All India Bank Employees’ Association said it is a retrograde step and the Centre should focus on recovering bad loans due by corporate houses rather than selling it off.