India Plans to Privatize IDBI Bank, Seek Strategic Investor
Signage of IDBI Bank seen at its Prabhadevi branch in Mumbai, India. (Photographer: Anirudh Saligrama/BloombergQuint)

India Plans to Privatize IDBI Bank, Seek Strategic Investor

India approved a plan to privatize IDBI Bank Ltd. as the government of Prime Minister Narendra Modi sells assets to narrow its budget gap.

The government plans to sell all or part of its 45.5% stake in the lender, as well a state-owned Life Insurance Corp. of India’s 49.2% ownership, according to a government statement on Wednesday. The sale envisages ceding management control, according to the statement.

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

Modi’s cash-strapped government is looking to raise money by divesting stakes in flagship state-run entities. These include two more banks, LIC itself and Air India Ltd. to finance projects and revive an economy struggling under a rampant second wave of the coronavirus pandemic.

Embattled IDBI Bank was penalized by the central bank in 2017 after its bad loan ratio surged and capital ratios depleted. The state insurer acquired 51% in IDBI Bank in 2019 to help the government bail out the lender. The RBI removed sanctions on the bank in March paving the way for its proposed sale.

The strategic buyer is expected to infuse funds and generate more business “without any dependence on LIC and government assistance,” according to the statement.

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