NEW DELHI: The Cabinet Committee on Economic Affairs (CCEA), on Wednesday, granted its approval for the long pending strategic disinvestment of IDBI Bank Ltd. The move comes a day after the bank declared its first annual profit in five years.
“The Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi approved the strategic sale of IDBI Bank, an official statement said on Wednesday. The extent of respective shareholding to be divested by the central government and LIC shall be decided at the time of structuring of transaction in consultation with the RBI,” the finance ministry said.
Currently, the Centre and LIC together own more than 94 per cent of equity in IDBI Bank 45.48 per cent and 49.24 per cent respectively. LIC is currently the promoter of IDBI Bank with management control and the government is co-promoter.
The ministry statement added that LIC’s Board has passed a resolution to the effect that LIC may reduce its shareholding in IDBI Bank Ltd by divesting its stake along with the strategic stake sale envisaged by the government with an intent to relinquish management control. It will do this by taking into consideration the price, market outlook, statutory stipulation and interest of policy holders.
“This decision of LICs Board is also consistent with the regulatory mandate to it to reduce its stake in the Bank,” it said. IDBI Bank had been put under the Prompt Corrective Action framework by the RBI in May 2017 after NPA levels reached 13 per cent and the bank breached thresholds for capital adequacy alongside other weakening parameters. Finance minister Nirmala Sitharaman had already announced during the budget that the bank would be privatised. “Other than IDBI Bank, we propose to take up privatization of two PSBs..,” she had said.
Other PSUs headed for privatisation this year
Other than IDBI Bank, the finance minister has also proposed to take up the privatisation of two Public Sector Banks and one General Insurance company in the financial year 2021-22