IDBI Bank Divestment | RBI Starts Evaluating Potential Bidders For State-Run Lender: Report

Kotak Mahindra Bank, Prem Watsa-backed CSB Bank and Emirates NBD are among those that have submitted expressions of interest

The Reserve Bank of India (RBI) has started evaluating at least five potential bidders interested in picking up a majority stake in state-run IDBI Bank Ltd, citing three sources privy to the development news agency Reuters reported.

According to the sources, Kotak Mahindra Bank, Prem Watsa-backed CSB Bank and Emirates NBD are among those that have submitted expressions of interest. However, Reuters was unable to confirm the names of the other potential bidders.

The RBI, Finance Ministry, IDBI, Kotak Mahindra Bank, CSB Bank, and Emirates Bank, however, did not respond to Reuters’ requests for comment.

The stake sale in IDBI Bank is the first major divestment across state-owned banks as part of a broader privatisation plan and could fetch the government Rs 300 billion ($3.66 billion) at the current market valuation.

The Centre owns 45.48 per cent of IDBI Bank, and is looking to divest a 30.48 per cent stake in the lender, alongside state-owned Life Insurance Corp of India (LIC), which will sell 30.24 per cent from its 49.24 per cent holding in the bank.

Expressions of interest, the first step in the stake sale process, closed in January, the sources told Reuters. The potential bidders have since begun due diligence on the bank, according to the people, who added financial bids were likely to be placed later this year.

The RBI is also conducting a "fit and proper evaluation", including extensive background and financial checks on the potential buyers, a crucial step before an investor is allowed to pick up stake in a local bank, the sources added.

Potential investors have raised questions around the extent of government control in IDBI Bank after the divestment since it will retain a 15 per cent stake and LIC, a government company, will have a 19 per cent stake, two of the sources said.

"The government does not intend to have any management control," one of the people said. "The government will take a call if a written submission to that effect is needed."

Buyers with an existing bank might be required to merge the operation with IDBI eventually because RBI regulations do not allow the same investor to own two banking entities, said Ashvin Parekh, a management consultant.