The Reserve Bank of India (RBI) has given its ‘fit and proper’ approval on bidders for IDBI Bank ahead of the Union Budget 2024, except one foreign participant, putting the ball squarely in the Modi government’s court. The Modi government’s ambitious privatization plans, including IDBI Bank, have seen limited progress due to the upcoming general elections. The upcoming budget is expected to provide key insights.
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IDBI Bank Stake Sale
The Narendra Modi government had set the ball rolling for divesting its stake in the development financial institution-turned bank in May 2021. Since then, the Centre has been waiting for the green signal from the RBI as the central bank assessed if the bidders met the fit and proper norms. These norms check if the bidders are compliant with regulations and are not under the scanner of other regulators.
RBI’s Report
The central bank has given its report on all but one bidder which happens to be a foreign participant, which did not share information and the overseas regulator too has not provided data. With the current market cap nearing Rs 95,000 crore, the Centre could potentially realize around Rs 29,000 crore from the disinvestment.
IDBI Bank’s Shareholders and Privatization
IDBI Bank’s largest shareholder, Life Insurance Corporation (LIC) holds more than 49 per cent of its stake, while the government holds a 45.5 per cent. The privatization plan involves selling 60.7 per cent of the bank. This would combine the government’s 30.5 per cent stake and LIC’s 30.2 per cent share.
Expectations from Union Budget 2024
Finance Minister Nirmala Sitharaman is set to present the full-year Union Budget for FY24-25 on July 23, 2024. The impact of the Union Budget on the equity market has reduced notably over the past few years with the government undertaking most of the reforms outside the purview of the Budget. However, this upcoming Budget is seen as a crucial catalyst for stimulating economic growth.
Banking Sector’s Wishlist for Union Budget 2024
As the upcoming Union Budget draws near, the banking sector has high expectations for policy changes and incentives that could drive growth, enhance financial stability, and support digitalization. Insights from leading industry experts shed light on what the sector is hoping to see.
Deepak Jasani, Head of Retail Research at HDFC securities, emphasizes the need for the Government of India to divest stakes in public sector banks, citing large government holdings and favorable market conditions. He also noted that given the challenge of raising deposits by banks, they would welcome parity with taxation of mutual funds and/or increase in the deduction limit for interest from bank deposits.
The banking sector is eagerly waiting for the Union Budget 2024 to signal the next steps for IDBI Bank privatization. With the RBI’s ‘fit and proper’ approval in place, the government is expected to take the process forward, and the budget is expected to provide key insights into the government’s plans.
FAQ’s
Q: When is the Union Budget 2024 expected to be announced?
A: The Union Budget 2024 is expected to be announced on July 23, 2024, at 11am by Finance Minister Nirmala Sitharaman.
Q: What is the significance of the Union Budget 2024 for IDBI Bank privatization?
A: The Union Budget 2024 is expected to provide key insights into the government's plans for IDBI Bank privatization, which has seen limited progress due to the upcoming general elections.
Q: What is the current status of IDBI Bank privatization?
A: The Reserve Bank of India (RBI) has given its 'fit and proper' approval on bidders for IDBI Bank, except one foreign participant, putting the ball squarely in the Modi government's court.
Q: How much is the government expected to realize from the disinvestment of IDBI Bank?
A: The government is expected to realize around Rs 29,000 crore from the disinvestment of IDBI Bank, with the current market cap nearing Rs 95,000 crore.
Q: What are the expectations from the banking sector for the Union Budget 2024?
A: The banking sector expects the government to announce measures to support digital infrastructure, MSME sector, real estate sector, and auto sector, among others.