The Hindu Business Line : IDBI recast: Govt stake may fall below 51 pc

THERE could be an interesting twist to the ongoing restructuring story for Industrial Development Bank of India (IDBI). The Ministry of Finance is going ahead with the recast work on the premise that all issues barring that of retaining of the development financial institution (DFI) character of the institution after its conversion into a bank have been left open after the passage of the restructuring Bill by Parliament.

This would mean that contrary to what is being generally assumed, the Ministry believes that there is no finality on the issue of retaining Government holding at above 51 per cent after the conversion of the institution into a bank and that no such firm assurance had been given by the Finance Minister, Mr Jaswant Singh, in Parliament.

According to highly-placed Finance Ministry officials, the view within the ministry is that the Finance Minister had merely assured Parliament that IDBI would have to function like any other bank and that its final recast plans would be dependent on the various banking-related Bills pending before Parliament.

"What the Finance Minister had told Parliament (at the time of passage of the Bill) was merely that IDBI would function like any other bank and that it would have to follow the regulation and laws applicable to other banks. There are several banking law related bills pending before Parliament and one would have to wait to see their fate before taking a decision. However, the DFI character would be maintained," officials said.

Besides, a Bill to revamp the Banking Regulation Act, a major Bill pending before Parliament is the one to amend the Banking Companies (Acquisition and Transfer of Undertakings) Act that seeks to allow the Government holding in public sector banks to fall below 51 per cent and go down up to 33 per cent.

However, officials did not give indication on whether there were any plans to make the proposed provision allowing Government holding to fall below 51 per cent in public sector banks applicable to IDBI as well.

The Bill to allow Government holding to fall to 33 per cent in banks has been pending for long. It is believed that the politically sensitive nature of the issue has come in the way of the proposed legislation not making much headway. The composition of the next Lok Sabha and the relative strength of the then ruling combination could have a heavy bearing on the future of the Bill.

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