Union Cabinet on Wednesday gave approval for the strategic divestment and transfer of management control in IDBI Bank. “The Cabinet Committee on Economic Affairs, chaired by Prime Minister Shri Narendra Modi, has given its in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank Ltd,” the Centre said in a statement.
“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 RBI,” it further added.
The government currently owns a 45.48% stake in IDBI Bank while Life Insurance Corporation (LIC) owns 49.24% controlling stake in the lender. In 2019, the state-owned life insurer infused Rs 21,624 crore into the bank. LIC is currently the promoter of IDBI Bank with Management Control and the 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 envisaged by the Govt. with an intent to relinquish management control and by taking into consideration price, market outlook, statutory stipulation and interest of policy holders,” the statement mentioned.
This decision of LICs Board is also consistent with the regulatory mandate to it to reduce its stake in the Bank, it said.
The strategic buyer will infuse funds, new technology and best management practices for optimal development of business potential and growth of IDBI Bank Ltd. and shall generate more business without any dependence on LIC and Government assistance/funds, the Centre mentioned.
“Resources through strategic disinvestment of Govt. equity from the transaction would be used to finance developmental programmes of the Government benefiting the citizens,” it said.
In Union Budget 2021, the Centre announced a target of Rs ₹1.75 lakh crore from stake sale in public sector companies and financial institutions, including 2 PSU banks and one insurance company in FY22.
Finance minister Nirmala Sitharaman had in her previous budget for 2020-21 set a target of raising ₹2.1 lakh crore from privatisation and sale of minority stakes in state-owned companies. This included ₹1.20 lakh crore from selling stake in CPSEs and ₹90,000 crore from stake sale in financial institutions.
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