Government not keen on strategic sale in IDBI after Air India fiasco
6 June 2018: The government is reviewing the projected imperative sale in IDBI Bank NSE 0.00 after an alike effort to sell its stake in Air India abandoned to take off. The bank may circulate fresh preferred shares, allowing multiple investors to participate, rather than seek to accelerate through strategic sale to a single article, said, officials.
“We are looking at various options as there is a matter that there may not be enough interest given the bad loans on the book of the lender,” a senior government official told ET on the situation of anonymity. Reducing government stake in the bank through an issue of preferential shares is one of the options on the table. Once government stake in bank drops to below 50% – from 81% at present – it will be able to function more separately. IDBI Bank is joined by a separate law, so the rule that mandates a minimum of 52% government stake in other banks does not apply to it. It is, therefore, possible for the government to decrease its stake without any legal changes.
The government had in 2015 announced its intention to transform IDBI Bank on the lines of Axis Bank. Finance minister Arun Jaitley had told in his 2016-17 budget speech that IDBI Bank’s conversion had already begun and that the government would also examine the option of decreasing its stake to below 50%. Heavy losses and mounting bad loans, however, postponed the restructuring plans. IDBI Bank’s gross non-performing assets or bad loans grew to Rs 55,588 crore in March 2018 from Rs 44,753 crore a. The bank’s troubles extended to Rs 5,663 crore for the quarter ended March 2018, up 77% from the Rs 3,200 crore loss reported for the year-ago quarter. The bank has said that it will put a record Rs 21,397 crore of bad loans from 30 large companies on the block.
On Monday, IDBI Bank’s managing director and CEO MK Jain was chosen as the next deputy governor of the Reserve Bank of India.
IDBI Bank has been the biggest beneficiary of the Rs 2.1 lakh crore bank recapitalization scheme.