On Wednesday, The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, gave its assent for strategic disinvestment along with transfer of management control in IDBI Bank Ltd.
LIC’s board has put forth the resolution to reduce shareholding, and of the government in the bank “with an intent to relinquish management control and by taking into consideration price, market outlook, statutory stipulation and interest of policyholders”, said the government in a statement.
45.48 per cent of IDBI Bank is owned by the government while LIC holds 49.24 per cent. The amount of stake dilution by both the insurer and the government is yet to come to any decision while structuring the execution of the deal in consultation with the Reserve Bank of India (RBI).
The decision of LIC’s board to reduce the insurer’s stake, below 15 per cent, in IDBI bank is in line with the Insurance Regulatory and Development Authority of India’s (Irdai’s).
When the cabinet will approve the deal, the Department of Investment and Public Asset Management (DIPAM) will have the authority to conclude divestment and appoint intermediaries for the sale.
On February 1, while presenting the Budget, Finance Minister Nirmala Sitharaman had put forth on the table to make two state-run banks along with IDBI privatized in FY22.
Meanwhile, In the quarter ending March, IDBI Bank reported four times higher profits in its standalone profit after tax to ₹512 crores as compared to ₹135 crores in the last year, coming up with an impressive 38% growth in its net interest income (NII).
The lender also became the profit generator on, annually basis in 5 years, as it reported a standalone profit of ₹1,359 crores for the FY20-21 as against a loss of ₹12,887 crores in FY20. On a consolidated basis, IDBI bank reported a net profit of ₹547.93 crores for the last quarter as against ₹165.69 crores in the last year.