In a Rs 400-crore (Rs 4 billion) deal brokered by the government, Industrial Development Bank of India will sell its 30 per cent stake in the Small Industries Development Bank of India to nationalised banks and insurance companies at Rs 30 per share.

The decision was taken at a meeting convened by Vinod Rai, additional secretary in the finance ministry's financial sector division and a Sidbi director, on Monday. Representatives from IDBI, State Bank of India, Punjab National Bank, Sidbi and other nationalised banks attended the meeting.

Despite several attempts, IDBI chairman M Damodaran could not be contacted for comment but executives in the financial institution confirmed the development.

After the sale, IDBI's stake in Sidbi will drop to 19 per cent. A banker who attended the meeting said that the share price was decided internally and no valuation exercise had been conducted by an external agency.

"The share price is the same as the first round of divestment by IDBI," he said.

Others who attended the meeting added that the division of shares is expected to be according to the formula worked out by the government when IDBI first off-loaded a 51 per cent stake in 2000-01.

The move is part of the restructuring measures in the banking sector taken at the government's behest. IDBI had asked the government to intervene in helping it sell its stake in Sidbi, which until three years ago was a wholly-owned subsidiary.

In November 2000, the finance ministry forced state-owned banks and insurance companies to acquire a 51 per cent stake in Sidbi.

When contacted, Sidbi chairman and managing director V K Chopra said, "The deal is between IDBI and other banks and institutions. I am aggrieved party so it won't be proper for me to discuss the details."

In 2000, following the amendment of the SIDBI Act, the dedicated institution for lending to the small scale sector was delinked from IDBI.

It, however, stipulated that the holding of state-owned institutions and banks should not go below 51 per cent.

Sidbi at present is a 49 per cent subsidiary of IDBI and has an equity base of Rs 450 crore (Rs 4.50 billion). As many as 36 banks, insurance companies and financial institutions hold stake in the Sidbi, with IDBI, State Bank of India and Life Insurance Corporation as the largest shareholders.