The government will allow a consortium of foreign funds and investment firms to own more than 51% in IDBI Bank, according to an official clarification issued. Foreign ownership in newly established private banks is now prohibited under Reserve Bank of India (RBI) regulations.
A current business like IDBI Bank would not be subject to the central bank's residency requirements for promoters, which only apply to newly established banks. the department of investment and public asset management (Dipam) said in a response to interested bidders’ queries. “The residency criteria would not apply to a consortium consisting of funds investment vehicle incorporated outside India,” it said.
If a non-banking financial company merges with IDBI Bank, the government and the RBI will also take that into consideration when deciding whether to relax the five-year lock-in period for shares, it said. The explanations are made in advance of the deadline of December 16 for expressing interest in buying the majority of IDBI Bank, one of the few lenders in which the government is looking to sell its stake.
At current prices, IDBI Bank has a market capitalisation of over Rs 63,000 crore and is worth more than Union Bank of India, which is much bigger in size. The bank’s share price has run up ahead of the privatisation and following its return to profitability.
Sources claim that the RBI would be able to perform a "fit and appropriate" study on the potential bidders thanks to the statement of interest. Only those who qualify can pick up a stake since the people who don't qualify are likely to be sounded off.