The Indian banking sector has undergone unfathomable change in the past few years. Conceived as a development financial institution in1964, Industrial Development Bank of India (IDBI) transited into IDBI Bank Ltd. in October 2004. The Government of India (GOI) and the Life Insurance Corporation of India (LIC) had to intermittently help shore up the financial health of IDBI Bank. Notwithstanding fund support from them, the Reserve Bank of India (RBI) was forced to put the IDBI Bank under the Prompt Corrective Action Framework and imposed several restrictions in view of its non-performing assets and losses incurred by it. The apex bank lifted these curbs in March 2021.
IDBI Bank’s Next Transformation
Well, it is now set for one more transformation. Decks have now been cleared for IDBI Bank to become a foreign bank. The GOI and LIC are on the verge of selling 60.72 per cent holding comprising 30.48 per cent of GOI and 30.24 per cent of LIC to Prem Watsa owned Fairfax. The sale will see the entities together getting Rs 52,878 crore. This is by far the biggest FDI flow into the Indian financial sector. GOI will retain a 15 per cent residual equity stake while LIC a 19 per cent, equity stake. Both of them will withdraw their nominees from the board to become public shareholders.
Well, the government has done the right thing. IDBI Bank is the second significant disinvestment by the Modi government after it divested its stake in Air India in favour of the Tatas a few years ago. Significantly enough, the Reserve Bank of India recently sanctioned the Scheme of Amalgamation of Indian branches of Emirates NBD Bank P.J.S.C. with RBL Bank Limited. The effective date of the amalgamation will be 1 December 2026. In late 2020, Lakshmi Vilas Bank (LVB) was amalgamated with DBS Bank India Limited (DBIL), the wholly-owned subsidiary of DBS Group Holdings Ltd. Since 2020, at least three banks have become foreign-owned.
In mid-90s, Tamilnad Mercantile Bank (TMB) was under intense public focus when the Ruais of the Essar group bought in over 65 per cent stake in the Nadar community bank following an internecine quarrel between the warring promoter groups. Much water has flown since then. Today, TMB has become a listed bank and its shareholder profile has undergone considerable change! Indeed, the banking scene has gone for a re-jig. The lessons are obvious. As we keep saying, it is not about who is right. It is important to care for what is right.
