Last week, the government gave its approval to IDBI Bank for raising Rs 3,771 crore during the year, by way of Qualified Institutional Placement (QIP), a move which will dilute its holding by about 26 percent in the lender.

The government's holding in the bank stands at 80.16 percent.

As per the existing norms, government equity in a public sector bank cannot go below 52 percent to maintain the character of state-owned banks.

Finance Minister Arun Jaitley had earlier indicated a change in the characteristics of IDBI Bank where government would have a majority stake, but at the same time maintain an arm's length distance.

Citing the example of Axis Bank, he had wondered if IDBI Bank can follow that model.

The government indirectly controls 29.19 percent in Axis Bank through the administrator of the Specified Undertaking of the Unit Trust of India (SUUTI), the Life Insurance Corp and four other public sector general insurance companies.

IDBI Bank came into existence, with Parliament passing the IDBI Repeal Act in 2003. In terms of provisions of the Repeal Act, IDBI has been functioning as a bank in addition to its earlier role of a financial institution.

Analysts feel that since IDBI Bank is not a nationalised bank, there is some operational freedom as far as stake dilution is concerned.

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