As part of strategic disinvestment, govt, LIC to sell stakes in IDBI Bank

The Cabinet Committee on Economic Affairs (CCEA) has approved strategic disinvestment along with transferring management control in IDBI Bank, paving the way for both the government and Life Insurance Corporation (LIC) to reduce their shareholding in the lender.


LIC’s board has passed a resolution to reduce its shareholding, along with that of the government, in the bank “with an intent to relinquish management control and by taking into consideration price, market outlook, statutory stipulation and interest of policyholders”, said a statement by the government.


The government holds 45.48 per cent in IDBI Bank while LIC holds 49.24 per cent. The extent of stake dilution by both the government and the insurer will be decided while structuring the deal in consultation with the Reserve Bank of India (RBI).


The decision of LIC’s board is in line with the Insurance Regulatory and Development Authority of India’s (Irdai’s) mandate to reduce the insurer’s stake in IDBI Bank below 15 per cent.


Approval from the cabinet will now give the Department of Investment and Public Asset Management (DIPAM) the authority to move ahead with divestment and appoint intermediaries for the sale.


The strategic buyer will have to infuse funds, bring in new technology, and implement best management practices for the growth of IDBI Bank. It will have to generate “more” business for the lender without being dependent on LIC or the government for funds, the statement said.


The decision by LIC to sell its stake in IDBI Bank was a coordinated move by the government because a new buyer of the bank would want to hold a majority stake in the lender, said a government official.


A new buyer acquiring the government’s entire stake in the bank would have still left LIC as a co-promoter or a majority shareholder, affecting key decisions. DIPAM will now scout for a buyer that will have to meet the RBI’s fit and proper criteria, he said.


In the Budget for 2020-21, Union Finance Minister Nirmala Sitharaman had announced the government’s balance shareholding in IDBI Bank would be sold to private, retail, and institutional investors through the stock exchange. However, the pandemic derailed the government’s divestment plans, and Sitharaman, in this year’s Budget, announced a number of transactions, including of IDBI Bank, would be completed in 2021-22.


In March IDBI Bank was removed from the RBI’s Prompt Corrective Action (PCA) framework after nearly four years, on improved financial performance.


The lender turned profitable in FY21 after five years and reported a net profit of Rs 1,359 crore for the financial year against a net loss of Rs 12,887 crore in FY20.







Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel