IDBI Bank continued to operate as a financial institution until 2004. But in 2004 it was completely transformed into a bank. IDBI has been given the status of a bank to accelerate business operations in the country.
IDBI Bank on the way to sell
The Union Cabinet on Wednesday approved the disinvestment of IDBI Bank in a major decision. Now the management control of the bank will also not be in his hands. The government made this thing public in the recent budget. Now the same thing is being implemented. Here, disinvestment can be understood by selling or privatizing. Government language disinvestment simply means that the company will be given into private hands. The company whose control was earlier in the government hands, will now be in private hands.
Here IDBI Bank is being called the government because LIC had 94 percent stake in the central government and its organization (Ministry of Finance). Till now LIC is the promoter of IDBI Bank, which has management control. LIC holds 49.21% stake in this bank. Now the management control LIC will be taken.
If you look at the history of this bank, it started in 1960 but then it was called Development Financial Institution. Later it was converted into IDBI Bank Bank. For this, permission was given by the Parliament. All the nationalized banks in the country are controlled through parliamentary laws. As soon as these banks are private, the obligation of Parliament ends.
DBI to IDBI Bank
Be it DFI or IDBI Bank, both have played a big role in the industrial development in the country because they helped the companies financially. This increased the business of industries, increased employment, increased market demand and accelerated the pace of development. Now the Cabinet Committee on Financial Affairs has allowed the sale of IDBI Bank. The chairman of this committee is the Prime Minister of the Government of India, Narendra Modi, whose decision was taken under this leadership. Now IDBI Bank will sell the shares of the bank. Under the rules of the Reserve Bank, the government and LIC will decide who to sell the shares to. The government had announced in the general budget that government banks will be sold in the future and from this the government will raise Rs 1.75 crore.
This is how IDBI Bank became
The government passed the Industrial Development Bank of India Act, 1964 to create IDBI Bank from DFI. Under this, DFI was converted into IDBI Bank on 1 July 1964. Under the Companies Act, 1956, IDBI Bank was declared a Public Finance Institution by the government.
IDBI Bank continued to operate as a financial institution until 2004. But in 2004 it was completely transformed into a bank. IDBI has been given the status of a bank to accelerate business operations in the country. The Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003 was brought and the IDBI Act, 1964 was repealed to be converted from a financial institution to a bank.
Stake of LIC
Later, government insurance body LIC bought a 51% stake in IDBI Bank. Now its disinvestment work has started. The LIC board passed a resolution stating that it would reduce its stake in the bank. For this, some disinvestment will be done and some shares will also be sold. Seeing the sale price, a decision will also be taken to transfer it to the management board.
On this basis, LIC will reduce its stake in IDBI Bank. It is believed that the company that will buy shares in the bank will set up its own fund. For the bank’s business to grow, it will require new technology and good management. After this, IDBI Bank will not be able to rely on the government and LIC to make its development from private funds.
RBI action
In March this year, the Reserve Bank had evicted IDBI Bank from Prompt Corrective Action (PCA) and taken it under its supervision. Some restrictions were also imposed on the bank under the PCA, which included expansion, investment and disallowance of loans. The Reserve Bank took this step because the bank’s NPA exceeded 13% in March 2017. The bank got stuck in such a huge loan that the Reserve Bank had to take it under its supervision. In a way, the burden of the bank was the burden of the government because it is completely a government company.
Bank association demand
The All India Bank Employees Association (AIBEA) believes that its biggest problem with IDBI Bank is a loan of Rs 36 thousand crore. By March 2021, the bank made a profit of Rs 1900 crore in one year, out of which Rs 1500 crore went to compensate for the NPA. Now the bank is being sold to correct this mistake.
The association says that it is being sold to hide the flaws of the bank and has demanded that the government withdraw its decision. The association has also said that Rs 2.3 lakh crore deposited in the bank is the money of the people, which should be used for the good of the people and the country and not for the private corporate.
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