The government has asked financial institution Small Industries Development Bank of India (Sidbi) to look for a bank it can acquire. This follows a recent meeting between the institution and the secretary-financial sector Vinod Rai. Sidbi has proposed that it should be either allowed to take over a bank or given a banking licence.

The government had formed a three-member committee comprising former Bank of India chairman M Balachandran, former Sidbi chairman N Balasubramanian and present deputy MD Rakesh Rewari to study the future growth model for Sidbi. The committee has suggested that Sidbi should be converted into a bank while it should continue its developmental role towards micro, small and medium enterprises (MSME).

The panel said one of the options is following the ICICI Bank model, wherein Sidbi would acquire a small bank and then get itself reverse merged to get the banking licence. Second, it can take the IDBI route wherein the government would issue a banking licence by taking the Parliaments approval. The third option, according to the committee, is letting Sidbi form a special purpose vehicle which could acquire the majority stake from the government in a state-owned bank.

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