The Cabinet Committee on Economic Affairs on Wednesday gave its in-principle approval for strategic divestment and transfer of management control in IDBI Bank Ltd.
The Government of India (GoI) and Life Insurance Corporation (LIC) together own over 94 per cent stake in IDBI Bank. While LIC is a promoter with management control in the bank with a stake of 49.24 per cent, GoI is the co-promoter with 45.48 per cent 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 the Reserve Bank of India," a release from the government said.
LIC's board has already passed a resolution to reduce its shareholding in IDBI Bank Ltd by divesting its stake along with strategic stake sale envisaged by the government with an intent to relinquish management control and by taking into consideration price, market outlook, statutory stipulation and interest of policy holders.
This decision of LIC's board is also consistent with the regulatory mandate to it to reduce its stake in the bank, the release said.
Finance Minister Nirmala Sitharaman has set a disinvestment target of Rs 1.75 lakh crore for financial year 2021-22, including privatisation of public sector banks.
Besides IDBI Bank, the government would privatise two public sector banks during FY22, Sitharaman had said while presenting the Union Budget on February 1.
"It is expected that strategic buyer will infuse funds, new technology and best management practices for optimal development of business potential and growth of IDBI Bank Ltd and shall generate more business without any dependence on LIC and government assistance/funds," the release said.
Earlier in March, the RBI had taken out IDBI Bank from prompt corrective action (PCA) framework, subject to certain conditions and continuous monitoring. The bank was put under the PCA framework in May 2017.