UPSC Prelims Practice Questions — Government Approves Strategic Restructuring of IDBI Bank Ltd.

Q1. The Government of India will receive its share of the proceeds from the strategic sale of IDBI Bank. With reference to how these proceeds are treated in the Union Budget, consider the following statements: Which of the statements given above is/are correct?

  1. They are classified as non-debt capital receipts of the Union Government.
  2. Other things remaining the same, they reduce the Centre's fiscal deficit for that year.
  3. Being non-tax in nature, they reduce the Centre's revenue deficit for that year.
  • A. 1 only
  • B. 2 and 3 only
  • C. 1 and 2 only
  • D. 1, 2 and 3

Q2. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. After acquiring 60.72 per cent of IDBI Bank's equity, the Fairfax-owned acquirer will not be able to exercise voting rights in proportion to its entire shareholding.
  2. The Banking Regulation Act, 1949 prohibits any single entity from owning more than 26 per cent of the paid-up equity of a private sector bank.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q3. A foreign-parented company wins a competitive bid to acquire a controlling stake in an Indian private sector bank, and the Union Cabinet approves the sale. Which one of the following must still happen before the company can become the bank's controlling shareholder?

  • A. Parliament must pass a resolution approving the bank's transfer to private control
  • B. SEBI must assess the acquirer as 'fit and proper' and approve the acquisition
  • C. The Competition Commission must certify the bid price as the bank's fair value
  • D. The RBI must assess the acquirer as 'fit and proper' and approve the acquisition

Q4. Consider the following facts about IDBI Bank. It was placed under the RBI's Prompt Corrective Action (PCA) framework in May 2017. The RBI categorised it as a private sector bank with effect from January 2019. The Government and LIC infused fresh capital into it in 2019. The RBI lifted the PCA restrictions in March 2021, subject to conditions and continuous monitoring. The CCEA gave in-principle approval for its strategic disinvestment in May 2021. Which of the following inferences can validly be drawn from these facts?

  1. The capital infused in 2019 was by itself enough to bring the bank out of PCA immediately.
  2. A change in a bank's classification from public sector to private sector does not, by itself, take the bank out of the PCA framework.
  3. Exit from PCA is a statutory precondition for the strategic disinvestment of any bank.
  • A. 2 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q5. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. In evaluating bids for the strategic sale of IDBI Bank, the prevailing market price of the bank's shares was not used as the benchmark of value.
  2. One of the valuation methods used in the sale counted the bank's tangible and intangible assets, including land, net of its liabilities.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct