The first bank to undergo the process of privatisation is state-run IDBI Bank. During the budget 2021, even though Union minister Nirmala Sitharaman has stated IDBI will not be privatised but looks like IDBI was the first.
The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has given its in-principle approval for strategic disinvestment along with the transfer of management control in IDBI Bank.
The extent of respective shareholding to be divested by the government and LIC shall be decided at the time of structuring of transaction in consultation with RBI. The government of India (GoI) (45.48 per cent) and LIC (49.24 per cent) together own more than 94 per cent of the equity of IDBI Bank.
This news comes at a time when IDBI Bank turned profitable in the fiscal ended in March 2021 after five years, posting a net profit of Rs 1,359 crore for the year. In 2019-20, the lender had posted a net loss of Rs 12,887 crore.
LIC is currently the promoter of IDBI Bank with management control and the Indian government is the co-promoter.
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.
This is intented to relinquish management control and by taking into consideration price, market outlook, statutory stipulation and interest of policy holders.
This decision of the LIC's Board is also consistent with RBI's mandate to it to reduce its stake in the Bank.
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.
The funds raised from this strategic disinvestment of Government equity from the transaction would be used to finance various government schemes.
