Centre asks CVC for clarity over supervision in privatised IDBI bank

IDBIThe government has asked the Central Vigilance Commission if it still has vigilance jurisdiction on the now privatised IDBI BankNSE 0.23 %, and sought its advice on the course of action in case of ongoing complaints or investigations, a government official said.

In January, the Reserve bank of India had classified IDBI Bank as a private sector lender after state-run Life Insurance Corporation (LIC) acquired 51% stake by infusing around Rs 20,800 crore capital.

“Since the lender is now owned by a state run financial institution we need to have clarity if we still can take up vigilance issues in the bank,” the official said.

Another government official confirmed that the financeNSE -0.21 % ministry has sought the CVC’s views and will proceed as advised.

In 2017, the Central Bureau of Investigation (CBI) had arrested former IDBI chairman Yogesh Agarwal and three other ex-officials in connection with the Kingfisher Airlines loan default case. They were accused of sanctioning loans worth over Rs 1,000 crore to the now-defunct airline despite its weak financial record.

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Agarwal and the other officials were later released on bail.

In August last year, the Union cabinet had approved the acquisition of controlling stake by Life Insurance Corporation (LIC) as a promoter in the bank through a combination of preferential allotment and open offer of equity.

LIC now holds 51% stake in the bank, while government share has come down to 46.46%.

A senior bank executive said the government doesn’t have any vigilance jurisdiction on the lender as it ceased to be a majority holder. “They have a board representative and that is it,” he said. “Any such vigilance related issues now need to be dealt internally or with the banking sector regulator, RBI.”

LIC will also need to bring down its stake in the bank as per insurance regulatory requirements and hence there is no case for government to take up vigilance issues, the bank official said.

The Insurance Regulatory Development Authority of India (IRDAI) has asked LIC to submit a proposal for bringing down its stake in IDBI Bank to below 51%. The banking sector regulator RBI also has set an upper ceiling of 15% for promoter stake in a private sector bank.

[“source=economictimes.indiatimes.”]