Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the sale of IDBI Bank (Industrial Development Bank of India) by divesting the Government of India’s 45.48% shares and Life Insurance Corporation’s (LIC) 49.26% shares in consultation with the Reserve Bank of India. The Government of India which had 95% shares in the IDBI Bank, facing controversies for the past two decades were trying to sell the Bank after it lost focus and changes in the operation methods and as a face-saver sold to public sector insurance behemoth LIC 44.26% shares in March 2019, when it did not get any buyers.
It is speculated that the government is expecting at least more than Rs.60,000 crore by selling its 95% shares in IDBI Bank having an aggregate balance sheet size of Rs.3.74 trillion as of 31 March 2016. IDBI Bank is having 3,683 ATMs, 1,892 branches, including one overseas branch in Dubai, 58 e-lounges and 1,407 centers as of 1 February 2020. The government is eyeing foreign banks like Singapore based DBS takeover of Lakshmi Vilas Bank. DBS takeover is now facing several cases in Mumbai High Court from the old shareholders of Lakshmi Vilas Bank (LVB) accusing the government and RBI of selling LVB to DBS at a cheap price. There are reports that some Indian corporates are also eyeing control of the Bank, which may invite legal issues regarding RBI’s policy on the banking sector.
IDBI Bank faced many controversies for several bad loans and the Central Bureau of Investigation (CBI) had registered a case for giving Rs.600 crore to Aircel promoter and scamster C Sivasankaran.
As no buyers were found in March 2019, as a face-saving exercise of the one-pocket-to-another-pocket deal, the government sold its’ 44.26% shares for Rs.21,624 crore. LIC already had five per cent shares in the Stock Exchange-listed IDBI Bank, which was established in 1964 through an Act of Parliament. For the past 20 years, IDBI Bank shares which are currently priced at Rs.38 was shuttling between Rs.15 to Rs.158 for the past two decades. Now with Wednesday’s Cabinet decision, the Government of India has decided to sell its entire 95% shares to private owners.
“It is expected that the strategic buyer will infuse funds, new technology and best management practices for optimal development of business potential and growth of IDBI Bank Ltd. and shall generate more business without any dependence on LIC and government assistance/ funds. Resources through strategic disinvestment of government equity from the transaction would be used to finance developmental programs of the government benefiting the citizens,” said the Government of India in a statement.
“We will not sell to State Bank or any other public sector bank. IDBI will be sold to a private bank. The word ‘strategic sector’ has been used because IDBI is classified as a private sector bank by the RBI. You cannot ‘privatize’ a bank which is already considered private,” the official said.
IDBI Bank faced many controversies for several bad loans and the Central Bureau of Investigation (CBI) had registered a case for giving Rs.600 crore to Aircel promoter and scamster C Sivasankaran. As per the CBI charge sheet, one-time fugitive Sivasankaran diverted Rs.600 crore to his companies in Finland and the British Virgin Islands. Many controversies have swirled around the IDBI Bank as it is accused by powerful people that governments used it as a tool for many deals and gave bad loans to many who later turned into fugitives. IDBI’s takeover of Union Western Bank in 2006 also raised controversies in valuations dictated by political masters (Read Finance Minister).
History of IDBI Bank
The Industrial Development Bank of India (IDBI) was established in 1964 under an Act of Parliament as a wholly-owned subsidiary of the Reserve Bank of India. In 1976, the ownership of IDBI was transferred to the Government of India and it was made the principal financial institution for coordinating the activities of institutions engaged in the financing industry in India. In the wake of financial sector reforms unveiled by the government since 1992, IDBI also provided indirect financial assistance by way of refinancing of loans extended by State-level financial institutions and banks and by way of rediscounting of bills of exchange arising out of the sale of indigenous machinery on deferred payment terms. After the public issue of IDBI in July 1995, the government shareholding in the bank came down from 100% to 75%.
A committee formed by RBI recommended the development financial institution (IDBI) to diversify its activity and harmonize the role of development financing and banking activities by getting away from the conventional distinction between commercial banking and developmental banking. To keep up with reforms in the financial sector, IDBI reshaped its role from a development finance institution to a commercial institution. With the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003, IDBI attained the status of a limited company viz., IDBI Ltd. Subsequently, in September 2004, the Reserve Bank of India incorporated IDBI as a ‘scheduled bank‘ under the RBI Act, 1934. Consequently, IDBI formally entered the portals of banking business as IDBI Ltd. from 1 October 2004. The commercial banking arm, IDBI Bank, was merged into IDBI in 2005. IDBI Bank’s equity shares are listed on the Bombay Stock Exchange and the National Stock Exchange of India.
As of 31 March 2015, the bank had 16,555 employees. The Bank also has subsidiary companies like IDBI Intech and companies engaged in Mutual Fund assets management.
 CBI names BSE chairman in Rs 600cr IDBI Bank fraud – Apr 28, 2018, ToI
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