Govt started making privatization of PSU banks

Govt started making privatization of PSU 

banks, starting with IDBI today, tomorrow 

your bank, so please support IDBI for 

against privatization

The government has firmed up plans to bring down its holding in IDBI Bank to 49 per cent, marking a big bang start to its commitment to reform state-run banks.
NEW DELHI: The government has firmed up plans to bring down its holding in IDBI Bank to 49 per cent, marking a big bang start to its commitment to reform state-run banks. The department of financial services in the finance ministry is working on the details of the proposal that could be considered shortly.

"The government has made up its mind to bring down stake in the IDBI Bank. Department of financial services is working on the details," a top finance ministry official told ET. The central government currently holds 76.5 per cent stake in the bank.

The official said the government would follow the model of Axis Bank, India's third-largest by market capitalisation, where the state owns a large stake indirectly but has no role in day-to-day operations.

In a notification to the stock exchanges on September 22, IDBI Bank said it had not received any communication from the government on the issue.

The notification was in response to remarks by finance minister Arun Jaitley on a TV channel that the government could consider an Axis Bank-like model for IDBI.

Unlike other state-run banks, IDBI Bank is governed by a separate law, the IDBI Act. While in the case of other state-run banks, the government has said it will not bring its stake to below 52 per cent, in the case of IDBI Bank there is no such restriction. Thus the government can bring down its stake to 49 per cent without having to approach Parliament. The government indirectly controls 29.19 per cent stake in Axis Bank through 100 per cent owned Specified Undertaking of UTI and state owned insurance company LIC.

Despite the large holding, the government has allowed Axis Bank to be run as a private sector bank, which is reflected in its valuations. The finance ministry is of the view that IDBI Bank can also be run similarly if the government's stake is brought down to below 50 per cent.

Like most other state-run banks, IDBI Bank, too, is saddled with non-performing assets, or NPAs. At a gross level, the bank's NPAs stood at 5.9 per cent of advances at the end of June 2015. IDBI Bank was created in 2003 through the IDBI Repeal Act that allowed the conversion of IDBI, a development finance institution (DFI), into a banking company.