IDBI Bank share price rose 8 percent on Tuesday over reports that the Union Cabinet will soon consider a proposal to divest the government's 45.5 percent stake in the lender. The Life Insurance Corporation of India (LIC), which owns 49.2 percent of IDBI Bank, will also be consulted before the stake sale process starts. The stock rose as much as 7.9 percent to its day's high of Rs 36.50 per share on the BSE.

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A Business Standard report on Tuesday said that the cabinet approval will give the Department of Investment and Public Asset Management (DIPAM) the authority to move ahead with the divestment process.

"DIPAM cannot move forward with the divestment process until approval from the cabinet is received, given that banks come under work allocation of the DFS. After the cabinet's approval, intermediaries can be appointed," the business news daily quoted an official as saying.

The government's plan to sell its holding in the lender was delayed due to the COVID-19 pandemic, the report added.

Last month, the Reserve Bank of India (RBI) took the lender out of the Prompt Corrective Action framework. RBI said that its Board for Financial Supervision (BFS) reviewed the performance of IDBI Bank in its last meeting on February 18, and noted that it is not in breach of the PCA parameters on any fronts. These include regulatory capital, Net Non-Performing Assets and Leverage ratio.

Presenting the Budget on February 1, Finance Minister Nirmala Sitharaman proposed to take up the privatisation of two state-run banks along with IDBI Bank in FY22.

(Edited by : Ajay Vaishnav)