The Centre is initiating plans to sell stake in IDBI Bank, though the exact modalities for the transaction are likely to be finalised later.

The Finance Ministry is likely to seek Cabinet approval over the next few weeks for selling its stake in IDBI Bank, sources close to the development said, but added that this would be the first step and that the transaction could take place towards the end of the fiscal year or early next fiscal.

The Centre currently holds a 47.11 per cent stake in IDBI Bank, and may consider selling stake in two to three tranches.

State-owned Life Insurance Corporation of India, which owns a 51 per cent stake in the bank, has also been alerted on the proposal, but it is unclear whether it will divest stake in the bank as of now. The insurer may choose to prune its stake in the bank at a later time when valuations are more attractive.

“As of now, work has begun on the initial proposal,” said a person familiar with the development.

Finance Minister Nirmala Sitharaman had, in the Union Budget 2020-21, announced that the government proposes to sell its balance holding in IDBI Bank to private, retail and institutional investors through the stock exchange.

“In the last few years, the government has taken concrete steps to bring our banking system to be robust,” she had noted.

The transaction would also help the Centre raise funds as part of its disinvestment programme, where it has targeted raising ₹2.1- lakh crore from stake sale proceeds this fiscal.

IDBI Bank reported a net profit of ₹324 crore for the second quarter this fiscal against a net loss of ₹3,459 crore a year ago. Its asset quality, too, has improved with gross non-performing assets at 25.08 per cent of gross advances as on September 30, 2020, versus 29.43 per cent a year ago.

The bank’s board is set to meet on October 29 to consider capital raise through a qualified institutional placement.

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