Cabinet approves strategic disinvestment and transfer of management control in case of IDBI bank

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On Wednesday, May 5, the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, gave its in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank Ltd. However, the extent of respective shareholding to be divested by Government of India and LIC will be decided at the time of structuring of transaction in consultation with RBI.

Government of India (GoI) shares

The Government of India (GoI) holds 45.48% equity of IDBI bank. It is also the co-promoter of the bank.

Life Insurance Corporation (LIC) shares

LIC holds 49.24% equity of IDBI bank. Together LIC and GoI own more than 94% of equity of IDBI Bank. Currently, LIC is also the promoter of IDBI Bank with management control rights.

LIC’s Board has also passed a resolution to the effect that it may reduce its shareholding in IDBI Bank Ltd. It may do so by divesting its stake along with strategic stake sale envisaged by the government with an intent to relinquish management control.

LIC may also take into consideration price, market outlook, statutory stipulation and interest of policy holders. This decision of the LIC Board is also consistent with the regulatory mandate to reduce its stake in the Bank.

About IDBI Bank

Established in the year 1964, IDBI or Industrial Development Bank of India facilitates in provision of credit and other financial facilities for the Indian industry. It is a development finance institution and a subsidiary of Life Insurance Corporation.

Why the disinvestment?

It is expected that strategic buyers will infuse funds, new technology and best management practices for optimal development of business potential. The disinvestment is also expected to bring growth and development to IDBI Bank Ltd. It would also generate more business without any dependence on LIC and government assistance/funds.

Resources through strategic disinvestment of government equity would also be used to finance developmental programmes of the government benefiting the citizens.