Although technically, IDBI Bank is not a public sector bank (PSB), there can’t be any retrenchment of employees following the LIC acquisition, as existing rules will continue to be applicable.
IDBI Bank still retains the character of a state-run lender and will continue to be governed by existing rules on hiring, even though it is technically a private bank now due to a drop in the government’s holding following the acquisition of a 51% stake by LIC, official sources told FE.
Meanwhile, the All India Bank Employees’ Association (AIBEA) on Wednesday wrote to the Reserve Bank of India (RBI), asking the regulator to reconsider its decision to categorise the bank as a private entity.
A senior government official said: “Although technically, IDBI Bank is not a public sector bank (PSB), there can’t be any retrenchment of employees following the LIC acquisition, as existing rules will continue to be applicable. So, there is no threat to the job of any employee. Any reservation policy (for hiring SC/ST candidates and others), too, will continue. In short, everything remains the same, only the status has changed on paper.”
Recently, the RBI classified IDBI Bank as a private lender, upsetting employees who started fearing for job security. Explaining the RBI’s decision, another source said once the government’s stake in a bank drops from 51%, technically, it ceases to be a PSB. However, promoter LIC is a state-run entity and the government still holds close to 47% in IDBI Bank. “So the bank will continue to have the PSB character,” said the official.
In a letter to the central bank on Wednesday, AIBEA’s general secretary CH Venkatachalam said: “IDBI and IDBI Bank have been created to be banks under the public sector.”
“Even though the government’s stake has come below 51%, LIC, which is the main share-holder, is also a 100% government corporation and hence, the re-categorisation is unwarranted and motivated against public interest,” the letter says.
The government had in August 2018 approved the LIC-IDBI Bank deal, valued by analysts at around Rs 12,000-13,000 crore. Prior to the move, LIC had held 7.98% in the debt-laden lender.
The bank reported a net loss of Rs 4,185.5 crore for the December quarter on the back of a 56.3% jump (year on year) in provisions. The loss marked a more than a three-fold increase from the level reported a year before.
The Industrial Development Bank of India (IDBI) was set up in 1964 under the Industrial Development Bank of India Act as a development financial institution. It continued to serve as a DFI for 40 years until 2004, when it was transformed into a bank.