Stock prices of IDBI Bank rose by over 6% to Rs 78.70 on Monday, posting an overall 36% gain in the past six trading sessions on the back of reports on dilution of its stake by the government to 49%.
"The government has made up its mind to bring down stake in IDBI Bank. The Department of Financial Services is working on the details," a top Finance Ministry official told The Economic Times last week.
Currently, the Central government owns 76.5% stake in the bank.
The government is looking to allow the bank function on the lines of Axis Bank, where it owns a significant stake indirectly "but has no role in day-to-day operations," the official revealed.
The government now indirectly holds a stake of 29.19% in Axis Bank through its fully owned entity, Specified Undertaking of the Unit Trust of India (SUUTI) and State-owned insurance company, LIC.
Besides, Finance Minister Arun Jaitley in an interview to CNBC-TV18 last week confirmed that the government may consider "an Axis Bank-like model for IDBI".
However, IDBI Bank said that it had not received any information from the government regarding the stake sale.
Compared to other State-owned banks, IDBI Bank is governed by a separate law, the IDBI Act, which allows the government to reduce its stake to 49% without the approval of Parliament.
"The Finance Ministry is of the view that IDBI Bank can also be run similarly if the government's stake is brought down to below 50 per cent," the report added.