Govt not keen on strategic sale of IDBI stake, may issue preferential shares: Report

The government is not keen on a strategic sale of its shares in IDBI Bank, and might instead sell preferential shares, The Economic Times reports.

"We are looking at various options as there is a concern that there may not be enough interest given the bad loans on the book of the lender," a senior government official told the paper.

The government's revaluation of its strategy to sell its IDBI stake could be due the failed Air India divestment.

The government currently has an 81 percent shareholding in IDBI.

The mandatory 52 percent government stake rule in state-run banks does not apply because IDBI falls under a separate law. This means the government can lower its stake to below 52 percent without facing legal consequences.

Also read - Government is considering merger of 4 public sector banks: Report

A structure similar to Stressed Asset Stabilisation Fund (SASF) is another option that could be considered.

"It is too early, but given the bank’s exposure to most corporate loans that are already being resolved through the Bankruptcy Code, such a structure also looks feasible," a source told The Economic Times. 

In 2004, the government had transferred IDBI's bad loans when it transformed from a financial institution into a bank. But the government is not looking to transfer IDBI's stressed assets to another state-run bank.

Incidentally, IDBI Bank is one of the four state-run banks the government is reportedly trying to merge. The government is planning to bring together IDBI Bank, Bank of Baroda, Oriental Bank of Commerce and Central Bank of India, media reports suggest.