The government now plans to invite Expressions of Interest (EoIs) in May for the sale of its stake in IDBI Bank and expects to complete the divestment process in the current fiscal year 2022-23, sources said. They said the roadshows for the divestment of IDBI Bank are not over yet.
Previously, the government’s plan was to invite EoIs to the privatization of IDBI Bank in April. “The government now plans to invite EoIs in May,” the sources told CNBC-TV18. They said the government is still striving to complete the privatization of IDBI Bank in FY23 and that it will be done within the existing RBI framework.
Reserve Bank of India (RBI) rules do not include corporate houses as bidders/promoters of banks. With the divestment, the government plans to sell its entire 45.48 percent stake.
In January 2019, the bank became a subsidiary of LIC, after acquiring additional 8,27,590,885 shares. In December 2020, IDBI Bank was classified as an associate due to the reduction of the LIC stake to 49.24 percent.
In May 2022, the Cabinet Committee on Economic Affairs had approved in principle the strategic divestment and transfer of management control in IDBI Bank. For the divestment, changes have been made to the IDBI Bank Act through the Finance Act 2021 and advisors have also been appointed.
The government may also seek to sell a roughly 26 percent stake in the bank along with management control to attract investors.
LIC chairman MR Kumar has previously said: “We would like to have a stake in IDBI Bank. The whole idea of us taking a stake in the bank was strategic in nature and it hasn’t gone away at all… In fact, IDBI Bank has been the strongest contributor to the bancassurance channel. This was something that would help LIC grow that particular channel in the post-IPO scenario.”
He had said: “I, as LIC chairman, would like to see the relationship continue in the future.”
Bank insurance is an agreement between a bank and an insurance company, whereby the latter can sell its products to the bank’s customers and others via the branch network.
Last week, the LIC promoted board of IDBI Bank approved the loan limit of Rs 8,000 crore for the fiscal year 2022-23.
The loan limit for rupee bonds can be borrowed in one or more tranches consisting of additional tier I (AT-1) bonds up to Rs 3,000 crore and senior/infrastructure bonds up to Rs 1,000 crore through private placement in 2022-23, the lender had said in a regulatory filing.
For the October-December 2021 quarter, the bank reported a 53 percent increase in its standalone net profit to Rs 578 crore. It had reported a standalone net profit of Rs 378 crore in the same period a year ago. However, the total income of the lender fell to Rs 5,772.86 crore during the quarter, compared to Rs 6,003.91 crore in the same period of 2020-21.
Read all the latest news, breaking news and IPL 2022 Live Updates here.