RBI categorised IDBI Bank as Private Sector Bank


The Reserve Bank of India (RBI) categorised the IDBI Bank Limited as a ‘Private Sector Bank’ for regulatory purposes with effect from January 21, 2019. The move came following the acquisition of the 51 percent of the total paid-up equity share capital of the IDBI bank by Life Insurance Corporation of India (LIC).

The IDBI Bank was categorised in the sub-group ‘other public sector banks’ by the RBI in April 2005. The ‘other public sector banks’ categorisation was rendered on the basis of the assurance given to the Parliament on December 8, 2004 by the then Finance Minister during the discussion on the Repeal Bill, 2003, that “the government holding in IDBI Ltd would always be above 51 percent”.

• The IDBI Bank is currently under the Prompt Corrective Action (PCA) framework of RBI that bans it from corporate lending, branch expansions, salary hikes and other regular activities. The entry of LIC is likely to solve the capital issue through the infusion of funds.

• The acquisition would help financially strengthen the LIC and the bank as well as their subsidiaries which offer financial products such as housing finance and mutual funds.

• The IDBI bank will get an opportunity to tap over 11 lakh LIC agents for doorstep banking services, positioning it to improve customer services and deepen financial inclusion.

• The bank would also be benefitted in terms of lower cost of funds through acquisition of low-cost deposits and fee income from payment services.

• LIC would get bancassurance (selling of insurance products by bank) through the bank’s network of 1916 branches, besides access to bank’s cash management services.