MUMBAI: According to an official clarification released on Tuesday, the government will permit a consortium of foreign funds and investment firms to own more than 51 percent of IDBI Bank.
Foreign ownership of new private banks is restricted by the RBI's current guidelines. In response to inquiries from interested bidders, the department of investment and public asset management (Dipam) stated that the central bank's residency requirements for promoters are only applicable to newly established banks and would not apply to an existing entity like IDBI Bank. It stated, "A consortium consisting of funds investment vehicle incorporated outside of India would not be subject to the residency criteria."
It stated that the government and the RBI would also consider easing the five-year lock-in period for shares in the event of IDBI Bank's acquisition of a non-banking financial institution. The clarifications come ahead of the December 16 deadline for expressions of interest to be submitted for a majority stake in IDBI Bank, one of the few lenders that the government is attempting to sell.
LifeInsurance Corporation (LIC) of India and the Indian government are looking to sell 60 percent of their stake in IDBI Bank. 7%. With a market capitalization of over Rs 63,000 crore at current prices, IDBI Bank is worth more than Union Bank of India, which is much larger. The bank's portion cost has run up in front of the privatization and followingits return to benefit.
The RBI will be able to carry out a "fit and proper" investigation of the potential bidders thanks to the expression of interest, according to reliable sources. It is likely that those who do not meet the requirements will be contacted, ensuring that only those who meet the requirements will be able to acquire a stake.
Because of the legal changes that were made to allow the LIC to buy a 50% stake, IDBI Bank is already considered to be a private sector bank. However, the market still views it as a quasi-PSU due to its public sector ownership.
The finance ministry stated on Tuesday that IDBI Bank would continue its primary dealer business even if a foreign bank acquired management control and a majority stake in the private sector bank.