Centre's reform express gathers pace, IDBI sale nears finish line

With two big-ticket announcements in the past week, the Centre’s focus on reforms appears set to continue, further reinforcing its commitment in the eyes of foreign investors.

While the Goods and Services Tax Council approved process reforms for the indirect tax regime at its meeting on October 8, the Union Cabinet also cleared the strategic disinvestment of IDBI Bank on Wednesday.

Asked whether the IDBI stake sale would serve as a model for further bank privatisation, Finance Minister Nirmala Sitharaman stressed that the reform express would continue.

"Having supported the bank’s recovery, we are now enabling its next phase of growth through the infusion of Foreign Direct Investment while retaining a minority stake. This will not only strengthen the banking ecosystem but also help banking services surpass global benchmarks. It reinforces that India’s growth story is strong, its economy is resilient, and the government’s commitment to reform is unwavering,” the finance minister said in a post on X.

The IDBI Bank stake sale process began nearly five years ago, and the Preliminary Information Memorandum inviting expressions of interest from interested parties was issued on October 7, 2022. Since then, the transaction has gone through numerous processes and regulatory clearances.

Significantly, the Rs 52,878-crore IDBI Bank transaction is the largest such exercise since the privatisation of Air India.

The deal will also provide the government with much-needed revenue in a year marked by high subsidy expenditure and volatile revenues amid the West Asia conflict. However, government sources maintained that the timing of the deal had nothing to do with the current geopolitical situation or domestic fiscal considerations.

“This is a completely unrelated exercise but will certainly help meet the target,” officials said, adding that the process had been pending for a long time and was long overdue.

With LIC and the Centre each selling a little over a 30% stake in the bank, the Centre is likely to receive around Rs 26,000 crore from the transaction. DIPAM has raised Rs 79,896.84 crore from disinvestment proceeds and PSU dividends so far this fiscal, bringing it close to the Rs 80,000-crore target for the year.