The government has approved the strategic disinvestment and transfer of management control in IDBI Ltd. The Cabinet Committee on Economic Affairs, which met under the chairmanship of Prime Minister Narendra Modi, gave its in-principle go ahead, according to an official statement on Wednesday. The government currently holds a 45.48% stake in the lender, while state-run Life Insurance Corp. of India is the promoter with a 49.24% stake.
“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,” the government said in the statement. The strategic buyer will infuse funds, new technology and best management practices for optimal development of business potential and growth of the bank and generate more business without any dependence on LIC and government assistance or funds, it said.
“Both LIC and Govt stake to be disinvested. The extent of stake sale to be determined later,” Department of Investment and Public Asset Management secretary Tuhin Pandey said in a tweet. The LIC board had passed a resolution to reduce its shareholding in IDBI Bank by divesting its stake along with a strategic stake sale envisaged by the government to relinquish management control, it said. This decision was also consistent with the regulatory mandate to reduce its stake in the bank, it added. In her budget speech for FY22, finance minister Nirmala Sitharaman had announced the privatisation of public sector banks as part of the disinvestment programme. “Other than IDBI Bank, we propose to take up the privatisation of two public sector banks and one general insurance company in the year 2021-22,” she had said.
IDBI Bank was designated a private sector lender after LIC acquired the majority stake in January 2019. The lender reported an annual profit after five years in FY21. Standalone profit stood at Rs 1,359 crore as against a loss of `12,887 crores in FY20. Net non-performing assets stood at 1.97% as against 4.19% on March 31, 2020. The Reserve Bank of India had taken IDBI Bank out of the prompt corrective action framework in March, subject to certain conditions and continuous monitoring.
OTHER DECISIONS
The Union Cabinet gave its ex-post facto approval for the allocation of additional food grains under the Pradhan Mantri Garib Kalyan Anna Yojana Phase III for another period of two months till June. It approved the signing of a memorandum of understanding on migration and mobility partnership between India and the United Kingdom of Great Britain and Northern Ireland.
