Mumbai: Concerned over the Central and state departments withdrawing deposits from IDBI Bank and also not offering fresh business to the LIC-owned lender, the finance ministry has suggested these departments to continue to do business with the struggling lender.
In a letter to these departments, the finance ministry has assured them of the bank's ability to serve them as before because the present promoter LIC is fully owned by the government, and the national insurer along with the government holds as much as 97.46 percent in the bank.
"It has been brought to the notice of the department that pursuant to the 51 percent 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in IDBI Bank by LIC, many Central/state government departments and government agencies/institutions have either withdrawn their funds or deposits from the bank or have not invited the bank to offer bids for deposits, or have expressed inability to continue grant of government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.
It can be noted that in January 2019, the insurance behemoth completed acquisition 51 percent stake in IDBI Bank, following which the Reserve Bank re-categorised it as a private sector bank.
The letter, seen by PTI, said LIC is wholly-owned by the government and together with the government's holding of 46.46 percent, the direct and indirect government holding in the bank is 97.46 percent, making 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 August 2018, the Cabinet had approved the acquisition of controlling stake by LIC as a promoter in the bank through a combination of preferential allotment and open offer of equity.