After Air India stake sale flop show, govt may reconsider strategic sale of IDBI Bank; could issue preferential shares instead

After the plan to divest a majority stake in debt-ridden national carrier Air India failed to take-off, the government might now shun a planned strategic sale of debt-laden IDBI Bank, and could consider other options to cut its stake in the state-run lender, according to a media report.

IDBI Bank, which does not come under the rule that mandates a minimum 52 percent government stake in other state-run banks, has been reeling under bad loans. Instead of a strategic sale, the government, according to a senior officials, could issue preferential shares to a pool of investors, as opposed to pushing through with a sale to a single entity, The Economic Times reported.

“We are looking at various options as there is a concern that there may not be enough interest given the bad loans on the book of the lender,” a senior government official was quoted as saying by the newspaper. The government holds 81 percent stake in IDBI Bank.

Representational image. Reuters

Representational image. Reuters

On Monday, a Mint report said that the government was mulling merging at least four state-run banks, including the Bank of Baroda, IDBI Bank Ltd, Oriental Bank of Commerce and Central Bank of India. If the government does pull off the plan, the merged entity will become the second-largest bank in the country after Mumbai-traded State Bank of India (SBI).

IDBI Bank posted a loss of Rs 5,662.76 crore for the fourth quarter ending March 2018, its numbers being pulled down further by deteriorating bad loans. IDBI had reported a net loss of Rs 3,199.77 crore in the corresponding quarter of the previous fiscal.

IDBI Bank has now reported losses for six successive quarters. Its net interest income fell 44 percent to Rs 915.47 crore during the quarter in consideration, as compared to Rs 1,633.29 crore in the same quarter of the preceding fiscal year.

IDBI's gross NPAs during the fourth-quarter of FY18 went up to Rs 55,588.26 crore, as against Rs 44,752.59 crore in the same quarter last year.

In January, the then finance minister Arun Jaitley said the government's decision on the privatisation of IDBI Bank stood, and that it will be implemented at the right time. "One of the objectives in supporting the non-PCA (Prompt Corrective Action) banks has been that these are the banks where robust lending has to take place so that they are able to support growth, lending and the economy itself," Jaitley said.

"The original decision (on privatisation of IDBI Bank) stands. It's has not been reconsidered but there is always a time for implementing a decision," he said.

In 2016, Jaitley said that India was not ready for privatisation of state-owned banks and that their characteristics would continue, but made an exception for IDBI Bank.

With inputs from agencies


Updated Date: Jun 06, 2018 20:48 PM

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