New Delhi: Even as the Reserve Bank of India (RBI) has classified the IDBI Bank as a private lender after its acquisition by the Life Insurance Corporation of India (LIC), it will continue to function as a public sector lender. After being acquired by LIC, the government stake in IDBI fell below 51 percent and that is why the RBI categorised the bank as a private lender. This, in turn, gave rise to fears amongst bank employees that it will lead to job cuts.

'IDBI bank won't be able to retrench employees'

A senior government official said that even though IDBI is technically a private bank, it cannot retrench employees and will have to follow the existing rules for hiring. The source said that the reservation policy is likely to continue like before and everything will remain the same. "The status has changed only on paper," he said.

IDBI fulfils criteria for a PSB

A lender cannot be categorised as a public sector bank (PSB) if the government stake falls below 51 percent, as has happened in the case of IDBI Bank. But LIC, which now controls about 51 percent stake in IDBI Bank, is a fully government-owned enterprise. By virtue of this, the bank might continue to function as a public sector bank.

Employee Union asks RBI to reconsider 'private' lender tag

However, the All India Bank Employees' Association (AIBEA) has asked the RBI to reconsider the decision to categorise IDBI Bank as a private entity. A letter written by AIBEA's general secretary CH Venkatachalam said, "Even though the government's stake has come below 51 per cent, LIC, which is the main shareholder, is also a 100 per cent government corporation and hence, the re-categorisation is unwarranted and motivated against public interest."