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LIC and Central Government of India will divest 60.72% stake in IDBI Bank

Industrial Development Bank of India (IDBI Bank)

The central government and the Life Insurance Corporation (LIC) of India have made the decision to sell their 60.72% ownership holding in IDBI Bank. As of June 30, the two owned over 94% of IDBI Bank, with the Center holding a 45.48 % interest and LIC holding a 49.24% stake.

 According to the specifics, the Center will sell a 30.48% ownership, while LIC will sell a 30.24% stake. In India, this would be the country’s first attempt at privatising a public sector bank.

Details indicate that December 16 is the deadline for submitting IDBI Bank expressions of interest (EoIs). All expressions of interest (EOIs) must be submitted within 180 days of the start date and may be extended by an additional 180 days.

According to a tweet from the DIPAM Secretary, “Expression of Interest is requested for Strategic Disinvestment of specific GoI and LIC holdings in IDBI Bank coupled with the transfer of management control.” Disinvestment refers to the sale or liquidation of government-owned assets.

The Center announced its desire to leave IDBI Bank last year. From May 2017 to March 2021, the bank was subject to the Prompt Corrective Action (PCA) framework of the Reserve Bank of India (RBI).

After observing an improvement in financial performance, the RBI removed IDBI Bank from its PCA framework for tighter regulatory monitoring in March 2021.

After that, its strategic disinvestment and transfer of management control were approved by the Cabinet Committee on Economic Affairs. 

The IDBI (Transfer of Undertaking and Repeal) Act, 2003 has been revised by the government to allow IDBI Bank to obtain a licence in accordance with section 22 of the Banking Regulation Act.

The sale of IDBI Bank will help the Center reach its Rs 65,000 crore divestment goal for FY23. It has already raised Rs 24,544 crore, the majority of which came from the May listing of the nation’s largest insurer, LIC.

A number of businesses, including BEML, Shipping Corp., Concor, Vizag Steel, IDBI Bank, Nagarnar Steel Plant of NMDC, and HLL Lifecare, have been targeted for divestiture by the Center.

The Center has emphasised company privatisation and urged businesses to look into investment opportunities, asserting that divestiture should be viewed as a reform rather than budgetary management.

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