An official said the current RBI rules bar industrial houses from becoming bank promoters. As per RBI guidelines, industrial houses can hold a maximum of 10 per cent stake in private sector banks, but they cannot be promoters.
Last week, with Govt. life insurance corporation ,LIC) invited Expression of Interest (EoI) for sale of 60.72 per cent stake in IDBI Bank. However, this prevented large industrial houses from participating in the strategic sale.
As per the bidding document, ‘Large Industrial/Corporate Houses’ is defined as an industrial/corporate group having assets of Rs 5,000 crore or more or more with non-financial business of the group in terms of total assets of 40 per cent. or more. / Total income.
Corporate houses have not been allowed to participate in the bidding process for IDBI Bank transactions, an official said. reserve Bank of India (RBI) regulation clearly states that they cannot be a promoter entity in any bank.
“As per IDBI Bank’s bidding document, if the consortium emerges as the winning bidder, it will be classified as a promoter. Allowing corporate houses as part of the consortium member would mean that they are in the promoter group which is not allowed as per RBI guidelines,” PTI quoted the official as saying.
Reserve Bank of India will be the final deciding authority on whether the intending bidder belongs to a large industrial house or a company associated with a large industrial house.
last date of submission EOI for IDBI Bank It’s December 16th.
Once the EOI is in place and the interested parties approve and receive RBI’s ‘fit and proper’ assessment home Ministry (MHA) Eligible bidders will be given security clearance, data room access. The bidders will place the financial bids only after due diligence.
The official said the financial bidding process is expected to be completed by the end of March next year and finally the strategic sale is expected to conclude at the beginning of the next financial year beginning April 2023.
Private sector banks, foreign banks, RBI-registered non-banking finance companies, SEBI-registered alternative investment funds (AIFs), a fund/investment vehicle incorporated outside India allowed to submit bids individually or in consortium Will be
However, this barred large industrial/corporate houses or individuals from participating in the bidding process.
The net worth limit for bidders has been capped at Rs 22,500 crore, and they will have to report net profit in three of the last five years. In addition, 40 per cent of the equity will have to be locked in for five years.
LIC currently holds 49.24 per cent stake in IDBI Bank, while the government holds 45.48 per cent. The remaining 5.2 percent is held by public shareholders.
After the conclusion of this strategic sale, the combined stake of the government and LIC in IDBI Bank will come down from 94.72 per cent to 34 per cent.
The government will sell 30.48 per cent stake and LIC will sell 30.24 per cent along with transfer of management control, taking the total to 60.72 per cent.
If the Bidder intends to amalgamate IDBI Bank with itself, the Government and LIC shall vote for such amalgamation or merger at the Board or Shareholder Meetings.
Where was the privatization of IDBI Bank first announced? Union Budget of 2021-22, after which the Cabinet Committee on Economic Affairs gave in-principle approval for strategic disinvestment and transfer of management control in May 2021.
IDBI Bank was classified as private sector bank Consequent upon receipt of 51 per cent of the total paid-up equity share capital of the Bank by LIC, with effect from January 21, 2019, by the Reserve Bank of India.
Shares of IDBI Bank closed at Rs 46.55, up 9.02 per cent over the previous close BSE, The sale of 60.72 per cent stake at the current market price will fetch about Rs 30,000 crore to the exchequer.
(with inputs from PTI)