In 2019, the Life Insurance Corporation of India infused more tha Rs 4700 crore into the struggling state-owned bank IDBI, which was under pressure from mounting bad loans. In a bailout backed by the government, the national insurer increased its stake in the 68-year-old bank, which now stands at more than 49 per cent. But three years later, the LIC along with the central government is offloading 60 per cent of stake in the lender, as part of PM Modi’s strategic divestment programme.
Part of a larger privatisation push
The government and LIC currently have a 94 per cent stake in IDBI, which was founded as a fully owned subsidiary of the Reserve Bank of India back in 1964. Now both will sell off close to 30 per cent of their shares in the bank, as part of a larger push to raise Rs 6 lakh crore from stressed government assets. This is the first attempt to privatise a public sector lender, which had also been opposed by the All India Bank Officers’ Association, that had called a strike against it in March.
Are more banks lined up?
As part of the Union Budget in FY22, the Indian government had announced plans to privatise two public sector banks as part of its divestment push. Earlier reports had also suggested that the Modi government had marked Bank of Maharashtra, Bank of India, Central Bank and Overseas Bank, for privatisation. Although assets have been identified for divestment in four years, selling off Air India took a long time, after which the privatisation of BPCL has also been stalled.
Infrastructure assets across power, rail and road sectors had been identified for selling by the NITI Aayog, but India’s Minister of Railway Ashwini Vaishnaw ruled out complete privatisation of Indian Railway, after concerns were raised by the opposition. Apart from divestment, public sector banks have also been merged in India, to strengthen their financial positions.
