This comes after the Indian government said it would allow a consortium of foreign funds and investment firms to own more than 51%. IDBI Bank. The current guidelines of the Reserve Bank of India restrict foreign ownership in new private banks. The central bank’s residency norm for promoters is applicable only for newly established banks and will not apply to an existing entity like IDBI Bank, the Department of Investment and Public Asset Management said in response to queries from interested bidders.
In October, the government had initiated the process of privatization of IDBI Bank, offering private and foreign banks a 60.72% stake in the lender along with management control. The Cabinet Committee on Economic Affairs has given in-principle approval for strategic disinvestment and transfer of management control in IDBI Bank In May 2021.
LIC currently holds the management control of the bank with 49.24% stake. The government holds 45.48%, while the remaining 5.28% is held by the public. Government will offload 30.48% and LIC 30.24%, up to 60.72%. The successful bidder will be required to make an open offer to acquire 5.28 per cent of the public shareholding.
The intending bidders will have to pass RBI’s ‘fit and proper’ assessment at the EOI stage itself and obtain security clearance from the Government/Ministry of Home Affairs to be able to access IDBI Bank’s data room for due diligence.
DIPAM had earlier said that potential investors should have a minimum net worth of Rs 22,500 crore, should report a net profit in three of the past five years to be eligible to bid for IDBI Bank.
Also, a maximum of four members will be allowed in a consortium. The successful bidder will have to mandatorily lock-in at least 40 per cent of the equity capital for five years from the date of acquisition.
While IDBI has been designated a private sector bank by the RBI, this will mark the first time that a lender majority owned by the government and state-run entities is being divested.
The government has set a target of Rs 65,000 crore from disinvestment in 2022-23, of which it has raised Rs 28,382.67 crore, mostly due to the public market listing of LIC in May this year.
IDBI Bank came out of RBI’s prompt corrective action framework in the financial year 2020-21. It has made profits for ten consecutive quarters from the January-March quarter of FY20.