Strategic disinvestment and transfer of management control in IDBI

The Union Cabinet recently approved the Strategic Disinvestment and transfer of management control in IDBI bank.

Current Scenario

The Government of India recently holds 45.48% stake in IDBI bank, LIC (Life Insurance Corporation) owns 49.24%. In 2019, LIC infused 21,624 crores of rupees into bank. It is the current promoter of IDBI and GoI is the co-promoter.

Background

During the Union Budget 2020-21, the Finance Minister Smt Nirmala Sitharaman announced a target of 2.1 lakh crores of rupees from privatisation and sale of minority stakes in state-owned companies.

What is the plan?

The strategic buyer will infuse funds, best management practices for optimal development, best management practices to generate more businesses without the dependence in Government of India and LIC.

Annual Disinvestment targets missed

As of January 2021, only Rs 14,000 crores were raised through disinvestment as against the target of Rs 2.1 lakh crores.

Why is Disinvestment needed?

There is a pressure to raise sources that will support in economic recovery and will also help meet the expectations in health care. It will eliminate the need for the involvement of Government of India in non-strategic areas.

DIPAM

DIPAM is Department of Investment and Pubic Asset Management. It is the nodal department for strategic sale in the Public Sector Undertakings. Earlier, the Public Sector Undertakings were identified by NITI Aayog.

The Department of Disinvestment was renamed as DIPAM in 2016.

Disinvestment and Strategic Disinvestment

Disinvestment is dilution of Government’s stake in public enterprises. Strategic disinvestment is transferring the end control to some other entity.

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