Government’s holding in IDBI Bank to be reduced to 49%

In Banking and Finance
September 26, 2015

The government has firmed up plans to bring down its holding in IDBI Bank to 49 per cent, marking a big bang start to its commitment to reform state-run banks. The department of financial services in the finance ministry is working on the details of the proposal. The government would follow the model of Axis Bank, India’s third-largest by market capitalisation, where the state owns a large stake indirectly but has no role in day-to-day operations.

Unlike other state-run banks, IDBI Bank is governed by a separate law, the IDBI Act. While in the case of other state-run banks, the government has said it will not bring its stake to below 52 per cent, in the case of IDBI Bank there is no such restriction. Thus the government can bring down its stake to 49 per cent without having to approach Parliament.

The government indirectly controls 29.19 per cent stake in Axis Bank through 100 per cent owned Specified Undertaking of UTI and state owned insurance company LIC. Despite the large holding, the government has allowed Axis Bank to be run as a private sector bank, which is reflected in its valuations.

IDBI Bank

IDBI Bank is an Indian government-owned financial service company, formerly known as Industrial Development Bank of India, headquartered in Mumbai.
The Bank was established in 1964 by an Act of Parliament to provide credit and other financial facilities for the development of the fledgling Indian industry.
In September 2004, the Reserve Bank of India incorporated IDBI as a ‘scheduled bank’ under the RBI Act, 1934.