Finance Ministry asked agencies and Govt departemnents to continue with IDBI

Recently, Finance ministry has shown concern on IDBI bank as the Central and state departments are withdrawing deposits from IDBI Bank and also they are not giving fresh deposits to the bank. In such case, the finance ministry has adviced the departments and agencies to continue their business with the IDBI bank.

Finance Ministry has sent a letter to these departments, advicing on this and also assured that the IDBI bank is still able to serve them as before as the current promoter LIC is a government owned body. Also, it holds 97.46% in the bank.

“It has been brought to the notice of the department that pursuant to the 51% stake acquisition in IDBI Bank by LIC, many Central/state government departments and government agencies/institutions have either withdrawn their funds or deposits from the bank or have not invited the bank to offer bids for deposits, or have expressed inability to continue grant of government business to the bank,” the department of financial services said in a letter, dated December 18, to all the Central and state departments.

In January 2019, the Insurance company acquired 51% stake of the IDBI Bank, after which the Reserve Bank of India re categorised IDBI bank as the private sector bank.

As per the letter, LIC is a government owned body and it holds 46.46% together with government. Therefore the direct and indirect government holding in the bank is 97.46& which makes it a quasi sovereign entity.

“Keeping in view this fact, Central/state departments/ agencies/institutions may continue to consider IDBI Bank for grant of government business,” the letter said.

In the month of August 2018, the cabinet approved the purchase of the stakes by LIC as a promoter in the IDBI bank, which were through a combination of preferential allotment and open offer of equity.