The All-India Bank Officers' Confederation (AIBOC) has voiced strong opposition to the government's plan to privatise IDBI Bank , calling it a betrayal of parliamentary assurances made nearly two decades ago. This development comes as the government pushes forward with its disinvestment programme for the bank.

Parliamentary Assurance in Question

AIBOC's criticism stems from an assurance given in Parliament in December 2003 by the then Finance Minister. The assurance stated that the government would maintain at least a 51% shareholding in IDBI Bank at all times. The union argues that the current privatisation plan directly contradicts this commitment.

Privatisation Plans in Motion

Despite the opposition, the government appears to be moving ahead with its plans. Arunish Chawla, Secretary of the Department of Investment and Public Asset Management (DIPAM), has indicated that the IDBI Bank stake sale is expected to be completed within the current fiscal year. According to Chawla, qualified bidders have nearly finished their due diligence process.

Current Ownership Structure

The Government of India and Life Insurance Corporation of India (LIC) currently hold a combined 95% stake in IDBI Bank. Under the disinvestment programme, a significant 60.72% stake has been earmarked for sale.

AIBOC's Concerns and Recommendations

AIBOC has raised several concerns regarding the privatisation move:

1. Public Savings at Risk: The union argues that privatising IDBI Bank essentially amounts to privatising people's savings.
2. Alternative Suggestions: Instead of privatisation, AIBOC recommends:
   • Strengthening governance
   • Infusing capital through public financial institutions
   • Accelerating digital modernisation

The union has urged the government to withdraw the privatisation proposal, emphasizing the importance of maintaining public sector control over the bank.

IDBI Bank's Recent History

IDBI Bank's ownership structure has seen changes in recent years:

• January 2019: IDBI Bank became a subsidiary of LIC
• December 2020: Reclassified as an associate company when LIC's shareholding reduced to 49.24%

As the privatisation process continues to unfold, it remains to be seen how the government will address the concerns raised by AIBOC and reconcile its current plans with past parliamentary assurances. The outcome of this privatisation effort could have significant implications for the banking sector and public sector disinvestment strategies in India.

In a significant development for IDBI Bank , the Securities and Exchange Board of India (SEBI) has given its approval for the reclassification of Life Insurance Corporation of India (LIC) as a public shareholder. This decision comes as part of the ongoing strategic disinvestment process of IDBI Bank, subject to nine specific conditions that aim to ensure fair market practices and prevent undue influence.

Key Conditions for LIC's Reclassification

SEBI has outlined several crucial conditions that LIC must adhere to for its reclassification as a public shareholder:

1. Limited Voting Rights: LIC's voting rights will be capped at a maximum of 10% of IDBI Bank's total net effective voting rights.
2. No Control Over Bank Affairs: LIC is prohibited from exercising direct or indirect control over IDBI Bank's operations.
3. Absence of Special Rights: LIC will not have any special rights in IDBI Bank, whether through formal or informal arrangements, including shareholder agreements.
4. No Board Representation: LIC will not be represented on IDBI Bank's Board of Directors and cannot have a nominee director or act as a key managerial person.
5. Shareholding Reduction: As per the Reserve Bank of India's directive, LIC must reduce its residual shareholding in IDBI Bank to 15% or below within two years of the transaction closing date.

Compliance and Approval Process

The reclassification is contingent upon fulfilling all specified conditions and obtaining necessary statutory, regulatory, and corporate approvals. IDBI Bank will be required to make requisite applications to the stock exchanges for the reclassification of LIC's residual shareholding as 'public' after the completion of the strategic disinvestment transaction.

Implications of Non-Compliance

SEBI has made it clear that non-compliance with any of the stipulated conditions will result in the automatic withdrawal of the reclassification approval. This underscores the regulatory body's commitment to maintaining market integrity and preventing any potential conflicts of interest.

Disclosure and Transparency

As part of the process, LIC's intention to have its residual shareholding in IDBI Bank reclassified as public must be explicitly stated in the letter of offer dispatched to IDBI Bank shareholders. This letter will be in connection with the open offer made by the new acquirer pursuant to the strategic disinvestment.

The approval for LIC's reclassification marks a crucial step in IDBI Bank's disinvestment process, aligning with the government's broader strategy of reducing its stake in public sector enterprises. As the process unfolds, market participants will be keenly watching how these conditions shape the future ownership structure and governance of IDBI Bank.