Government mulls Axis Bank-like structure for IDBI

NEW DELHI: The government may be looking at flexibility available under the law to rework the structure for IDBI Bank, the development financial institution-turned bank, but it will have to deal with an earlier assurance given by the Centre that it will hold a majority stake in the entity before it amends the articles of association.

Finance minsiter Arun Jaitley's suggestion that the government was exploring the possibility of an Axis Bank-like structure has resulted in fresh speculation about the fate of IDBI Bank, which has been grappling with low current and savings account balances and has not managed to transform into a full-fledged bank like its erstwhile rival ICICI Bank did.

"Take Axis Bank for instance, and that is the model where, through various government instrumentalities, there's a major shareholding that the government has, but the government maintains an arm's length distance and it is a bank which has done remarkably well.Therefore, can we, with regard to any other institution that we have, like IDBI, follow that model?" Jaitley had said in an interview on Monday , resulting in a 17% jump in the bank's share price and a rise in volumes.

On Tuesday , the bank was forced to clarify to BSE that it has "no official information".But bank employees said they had been assured that the government would retain over 51% stake. "Considering its shareholding pattern, IDBI may be considered as a governmentowned bank in view of the assurance to Parliament given on December 8, 2004 by the finance minister during the discussion on the Repeal Bill 2003 that the government holding in IDBI Ltd would always be above 51%," RBI had said in a letter to IDBI on April 15, 2005. At present, the government holds 76% stake in IDBI Bank, which is expected to breach the 80% level once fresh capital infusion takes place.