On Wednesday the Cabinet Committee on Economic Affairs (CCEA) gave its in-principle approval for the strategic disinvestment of IDBI Bank along with the transfer of management control. As per the official release, the extent of respective shareholding to be divested by the Central government and LIC would be decided at the time of structuring of the transaction in consultation with the RBI.

More than 94% of the equity in IDBI Bank is held by the Central government and LIC together with the government holding a 45.48% stake, and LIC holding a larger stake of 49.24%. IDBI bank is currently promoted by LIC which also has command over its management, the Central government is the co-promoter of the bank. LIC’s Board has passed a resolution to the effect that the insurer may reduce the shareholding in IDBI Bank through divesting its stake along with strategic stake sale as envisaged by the government with an intent to surrender the management control and by taking into consideration price, market outlook, statutory stipulations and interest of policyholders. The decision made by LIC‘s Board is also compatible with the regulatory mandate to decrease its stake in the bank. It is anticipated that the strategic buyer will infuse funds, new technology, and best management practices for the optimal development of business potential and the growth of IDBI Bank and shall generate more business without any dependency on LIC and government assistance.

According to the release the resources gained by the strategic disinvestment of government equity from the transaction would be used to finance developmental programs of the government benefiting the citizens.