Govt exploring options to dilute stake in IDBI Bank

Various options are being considered, including strategic sale and offer for sale (OFS), for dilution of the government stake in IDBI Bank, but these are at a preliminary stage, sources said.

"Many issues have to be looked at in the case of dilution of stake and things are being examined at various levels," sources said.

IDBI Bank came into existence, with Parliament passing the IDBI Repeal Act in 2003. In terms of provisions of the Repeal Act, IDBI has been functioning as a bank in addition to its earlier role of a financial institution.

Analysts feel that since IDBI Bank is not a nationalised bank, there is some operational freedom as far as stake dilution is concerned.

Last month, Finance Minister Arun Jaitley had hinted a change in the characteristics of IDBI Bank where government would have a majority stake, but at the same time maintain an arm's length distance.

Citing the example of Axis Bank, he had wondered if IDBI Bank can follow that model.

The government indirectly controls 29.19 percent in Axis Bank through the administrator of the Specified Undertaking of the Unit Trust of India (SUUTI), the Life Insurance Corporation and four other public sector general insurance companies.

In the case of IDBI Bank, the government holding stands at 76.5 percent.

However, IDBI Bank in a regulatory filing to stock exchanges said it has not received any communication from the government on this.

At the same time, bank unions have started opposing any possible move to bring down stake of the government below 51 percent.

Earlier this week, Jaitley had said the government is open to diluting its stake in public sector banks to 52 percent.

"We are willing to look at all other changes, including bringing down government equity to 52 percent (in state-run banks), and therefore giving additional financial strength and teeth to the banking institutions themselves," he had said.

The Minister said the government is making all efforts to give a final shape to the Banking Bureau so that personnel issues can be ironed out.