The Indian cabinet has provided its in-principle nod for the strategic disinvestment and transfer of management control in IDBI Bank.
LIC is the largest shareholder in the bank with a holding of 49.24% and a promoter while the Indian government holds a 45.48% interest and is the co-promoter.
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The stake to be offloaded by the LIC and the government will be decided in consultation with the Reserve Bank of India (RBI)- the country’s apex bank.
The government expects the strategic acquirer to pump money along with new technology and best management practices to drive growth of IDBI Bank and generate more business without support from LIC and the government.
The government plans to use the proceeds from the strategic disinvestment of its stake to fund developmental programmes.
A release said: “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.
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By GlobalData“This decision of LICs Board is also consistent with the regulatory mandate to it to reduce its stake in the Bank.”
In March this year, the RBI withdrew certain restrictions placed on the operations of IDBI Bank.
The bank was taken out of RBI’s Prompt Corrective Action Framework (PCAF), following a review conducted by the Board for Financial Supervision (BFS) in its meeting held this week.
Notably, IDBI Bank was placed under PCAF in May 2017 restricting its expansion, investments and lending.
In 2019, Indian state-owned insurer LIC acquired 51% stake in IDBI Bank.
Meanwhile, according to a recent report, the Indian government has shortlisted four state-owned banks for potential privatisation to increase the state revenue by selling its assets in these banks.
These are Bank of Maharashtra, Bank of India, Indian Overseas Bank and the Central Bank of India.
