The Cabinet Committee on Economic Affairs (CCEA) has approved disinvestment along with transferring of management control in IDBI Bank, paving the way for both the government and the Life Insurance Corporation (LIC) to reduce their shareholding in the bank.

The government said in a statement that the extent of respective shareholding to be divested by the government of India and LIC shall be decided at the time of structuring of transaction in consultation with Reserve Bank of India.

Presently, LIC holds 49.24 percent while the government holds 45.48 percent shares in IDBI Bank.

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LIC's board has passed a resolution to reduce the company shareholding in the IDBI bank ‘with intent to relinquish management control and by taking into consideration price, market outlook, statutory stipulation and interest of policyholders’, a government statement added.

This decision of LIC's Board is also consistent with the regulatory mandate to reduce stake below 15 percent. This approval will now give the Department of Investment and Public Asset Management (DIPAM) the authority to move ahead with divestment and appoint intermediaries for the sale.

For the optimal development of business potential and growth of IDBI Bank Ltd, the strategic buyer will infuse funds, new technology and best management practices and shall generate more business without any dependence on LIC and Government assistance/funds.

The buyer acquiring the government's entire stake in the bank would have still left LIC as a co-promoter or a majority shareholder, affecting key decisions.

In the Budget for 2020-21, the Union Finance Minister had announced the government's balance shareholding in IDBI Bank would be sold through the stock exchange.

Funds generated through this strategic disinvestment would be used to finance developmental programs by the government.

IDBI turned profitable in the fiscal year 2021 after five years and reported a net profit of Rs 1,359 crore for the financial year against a net loss of Rs 12,887 crore in the fiscal year 2020.

(Edited by : Ankit Gohel)