Budget 2016: Govt moves towards privatisation of IDBI Bank

To bring stake in the bank below 51%; stock shoots up 8%

Union Finance Minister Arun Jaitley said in his Budget speech that the government has started the process of transformation of IDBI Bank and will look at bringing down government's stake in the bank below 51%.

Following an intent in the Budget, the IDBI Bank share shot up by 8% to 60 per share on Bombay Stock Exchange.

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Currently, government's stake in the bank is more than 80%.

This is the first official announcement on such a move, even as discussion were on to dilute stake in the bank. IDBI Bank could be test case for the government before it moves to reduce stake in other banks as capital infusion is becoming challenging for the government considering its tight fiscal stance. 

On recapitalisation, Jaitley said government will infuse Rs 25,000 crore in public sector banks, while the government stands to infuse more if need be. The figure is part of the planned recapitalisation that the government announced last year, under its Indradhanush programme. 

Under the plan, the government will infuse Rs 70,000 crore in phases and has already infused Rs 19,950 crore to 13 public sector banks. Hence, there is nothing much new in the racapitalisation front except the government assurance that it stands "solidly behind banks."