The country’s economy is facing a familiar challenge ~ the perennial struggle to meet divestment targets. The revelation that the Centre is set to miss its divestment goal by a staggering sum in the current fiscal year is a stark reminder of the persistent hurdles on the road to economic reform.
The Cabinet Committee on Economic Affairs (CCEA) has given its in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank Ltd.
The extent of respective shareholding to be divested by the GoI and LIC, shall be decided at the time of structuring of transaction in consultation with the RBI, said an official statement.
The Government of India (GoI) and the LIC together own more than 94 per cent of equity of IDBI Bank, with the Centre holding 45.4 per cent and the LIC owning 49.24 per cent stake. LIC is currently the promoter of IDBI Bank with management control and the Centre is the co-promoter.
LIC’s Board has passed a resolution to the effect that it may reduce its shareholding in IDBI Bank Ltd through divesting its stake along with strategic stake sale envisaged by the government with an intent to relinquish management control and by taking into consideration price, market outlook, statutory stipulation and interest of policy holders.
This decision of LIC’s board is also consistent with the regulatory mandate to it to reduce its stake in the bank.
The statement said that it is expected that 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 or funds.
Resources through strategic disinvestment of government equity from the transaction would be used to finance developmental programmes of the government benefiting the citizens, it said.