The Government raised nearly Rs 5,560 crore by disinvesting 9.1% of its total 20.7% stake in the leading private sector lender Axis Bank. The transaction of about 4.2 crore shares was done via the bulk deal route.
[Disinvestment – It is the action of an organisation or government selling or liquidating an asset or subsidiary. It is also known as “divestiture”]
The Government held 20.7% stake in the Bank through Specified undertaking of the Unit Trust of India (SUUTI). SUUTI was the entity created a decade ago when the UTI was bifurcated.
Axis Bank (Erstwhile UTI bank) began its operations, in 1991, after the Government of India allowed new private banks to be established.
Axis Bank opened its registered office in Ahmedabad and corporate office in Mumbai in December 1993 and its first branch in Ahmedabad was inaugurated in April 1994 by Dr. Manmohan Singh, the then Finance Minister.
During this time, the bank was promoted jointly by the Administrator of the Unit Trust of India (UTI-I), Life Insurance Corporation of India (LIC), General Insurance Corporation, National Insurance Company Limited, The New India Assurance Company, The Oriental Insurance Corporation and United India Insurance Company.
Brief History of UTI
In 1963, the Unit Trust of India (UTI) was established under the Act of Parliament. It was set up the RBI and functioned under the regulatory and administrative control.
In 1964, UTI launched its first mutual fund scheme called Unit Scheme 1964 (US64).
In 1978, UTI was delinked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control.
In 2003, following the repeal of the Unit Trust of India Act 1963, UTI was bifurcated into two separate entities.
1. First is the specified undertaking of UTI (SUUTI) scheme, assured return and certain other schemes. The specified undertaking of UTI (SUUTI), functioned under an administrator and rules are framed by Government of India and does not come under perview of the Mutual funds regulations.
2. Second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual funds regulations.
In 1991, UTI was allowed to start banking business as a private bank (UTI Bank, which later became Axis bank). The GoI had a stake in this bank through SUUTI. It was a part of this holding that the Government disinvested.
The recent Rupee appreciation has been also linked to the massive capital inflows because of the sale of government stake in Axis Bank, i.e. disinvestment. Rupee surged up by 45 paise on 21st March 2014 Friday to the end at 60.93 versus the US Dollar.