Finance Minister Nirmala Sitharaman on Saturday announced that the government plans to sell partial stake in the Life Insurance Corporation through initial public offer, or IPO. An IPO refers to the process of offering shares in the stock market. Public share issuance allows a company to raise capital from public investors.
The government set a divestment target of Rs 2.1 lakh crore for the 2020-’21 financial year, a major jump from the Rs 1.05-lakh-crore target for the ongoing fiscal. This government has divested Rs 18,094.59 crore so far this year.
In her Budget speech, Sitharaman also proposed that the government will sell its stake in IDBI Bank to private investors and amend Banking Regulation Act to strengthen co-operative banks.
The finance minister also said that the deposit insurance coverage against bank failure will be increased to Rs 5 lakh from Rs 1 lakh. The existing Reserve Bank of India rules stipulate that in case of a bank failure, each depositor is insured up to a maximum of Rs 1 lakh for both principal and interest amount.
The deposit insurance scheme is a protection cover against losses on bank deposits if a bank has no money to pay its depositors. The scheme covers all banks operating in the country, including private sector, co-operative and branches of foreign banks in India.