InvestorQ : Why does the government need a clarification from SEBI on the minimum public shareholding status of IDBI Bank?
shrinidhi Rajan made post

Why does the government need a clarification from SEBI on the minimum public shareholding status of IDBI Bank?

Answer
image
3 weeks ago
Follow

Ahead of the proposed sale of stake in IDBI Bank by the government of India and LIC, the government has sought clarification from SEBI on the status of IDBI Bank with respect to the minimum public shareholding (MPS) norms. Let us first understand what is this MPS confusion. Under SEBI regulations, any private listed company must mandatorily achieve 25% public shareholding within 3 years of listing. The only exception to this rule is the case of PSU companies where the 25% public holding can be achieved in 5 years.

Here is what the government has done. It has sought clarification from SEBI as to whether the minimum public shareholding (MPS) exemption would be applicable in the case of IDBI Bank. The answer to this question would depend on whether IDBI Bank would be classified as a private bank or as a PSU Bank. Why does this confusion between IDBI Bank being private or public arise? That is the main part of the debate and the key issue here is the nature and colour of the ownership structure of IDBI Bank. Here are the details.

As is well known, total ownership of over 94% of IDBI Bank rests with LIC and government of India put together. Now for the confusion. In January 2019, the RBI had specifically classified IDBI Bank as a private sector bank for regulation. That is because more than 49% of IDBI Bank is held by the LIC, an investment and insurance company. That is the source of the confusion. Remember, private companies don’t get exemption and they need to work towards 25% public shareholding within 3 years of listing. Centre wants SEBI to clarify.

5 Views