Central govt gives in-principle nod for strategic divestment in IDBI Bank

By Beena Parmar

  • 06 May 2021
Credit: VCCircle

The government has given an in-principle approval for strategic divestment along with transfer of management control of IDBI Bank Ltd, in what would be its first divestment in the banking sector. 

IDBI Bank’s shares have jumped over 7% on BSE and NSE.  

The extent of divestment by the government and Life Insurance Corporation (LIC) of India, both of which own over 94% of the bank, will be decided along with the Reserve Bank of India. 

India’s biggest insurer LIC, which is the promoter and largest shareholder with 49.24% stake, has management control. The Centre, which is a 45.48% owner, is the co-promoter. 

IDBI Bank was classified as a private sector lender after LIC acquired majority stake in January 2019.  

The LIC board has passed a resolution allowing the state-run insurance giant -- which is due for a listing in the third quarter of 2021-22 -- to divest. 

In March this year, the central bank also lifted the prompt corrective action (PCA) framework invoked against IDBI Bank in May 2017. 

Proceeds from the strategic divestment would be used to finance development programmes of the government.

Earlier this week, IDBI Bank reported an annual standalone profit for 2020-21 after five years at Rs 1,359 crore. 

Its consolidated net profit for the quarter ended March 2021 soared 230% year on year to Rs 547.93 crore. 

Gross non-performing assets (NPA) as a percentage of total loans improved to 22.37% as against 27.53% a year ago. The net NPA ratio also reduced to 1.97% from 4.19% a year ago.