IDBI Strategic Disinvestment

IDBI Strategic Disinvestment

News: The Department of Investment & Public Asset Management (DIPAM) has issued a Request for Proposal (RFP) to engage an asset valuer for the strategic disinvestment of IDBI Bank.

Background:
• RFP for Asset Valuer - DIPAM, representing the Government of India (GoI) and LIC, seeks a reputable asset valuer registered with the Insolvency & Bankruptcy Board of India (IBBI) to value IDBI Bank’s assets and assist in the strategic disinvestment process.
• Ownership Details - As of March 31, 2023, LIC holds 49.24% while the Government owns 45.48% of IDBI Bank.
• The strategic disinvestment plan aims to sell 30.48% of the Government’s stake and 30.24% of LIC’s stake, totaling 60.72% along with a transfer of management control in IDBI Bank.

Disinvestment in India:
• Disinvestment is the process of selling or liquidating government-owned assets, including Central and state public sector enterprises and fixed assets.
• Disinvestment is undertaken to reduce the fiscal burden on the government, helping it manage finances more effectively.
• It aims to raise funds for specific needs, such as bridging revenue shortfalls from other sources.

What is Strategic Disinvestment?
• Ownership Transfer - Strategic disinvestment involves transferring ownership and control of a public sector entity, often to a private sector entity.
• Privatization - It represents a form of privatization, with the government selling a substantial portion of its shareholding (up to 50% or more) in a central public sector enterprise (CPSE) and transferring management control.
• Economic Principle - Guided by the principle that the government should not engage in manufacturing or providing goods and services in sectors with competitive markets.

About DIPAM:
• DIPAM, formerly the Department of Disinvestment, operates under the Ministry of Finance. Functions:
• DIPAM handles the sale of Central Government equity in Central Public Sector Undertakings (PSUs) through methods like offer for sale, private placement, and other modes.
• It manages the Central Government’s equity investments, including the disinvestment of equity in Central PSUs.