Govt To Allow Consortium Of Foreign Funds To Own Over 51% In IDBI Bank: Report

The government and the Life Insurance Corporation of India (LIC) together hold 94.71 per ent of IDBI Bank.

The govt and LIC together hold 94.71% of IDBI Bank ( Image Source :Getty )

A consortium of foreign funds and investment firms can buy more than 51 per cent stakes in IDBI Bank Ltd, according to a government clarification on Tuesday. Although current RBI guidelines restrict foreign ownership of new private banks, the Department of Investment and Public Asset Management has said the rule would not apply to an existing entity like IDBI Bank, a Reuters report said. 

In response to interested bidders' queries, the Department of Investment and Public Asset Management said, "The residency requirement of the Promoter, under the RBI’s “Guidelines for ‘on tap’ Licensing of Universal Banks in the Private Sector, 2016”, is in context of new/prospective banks. However, as IDBI Bank is an existing banking company; hence, for the purposes of the Transaction, the said residency criteria would not apply to a consortium consisting of funds/investment vehicle incorporated outside India."

The department also clarified that the government and the RBI would also consider relaxing the five-year lock-in period for shares if a non-banking financial company is merged into IDBI Bank.

This response comes as the deadline to submit expressions of interest for a majority stake in IDBI Bank is just a few days away. The government and the Life Insurance Corporation of India (LIC) together hold 94.71 per ent of IDBI Bank and are looking to sell 60.72 per cent. 

The government has been trying to privatise IDBI Bank since 2016. As no buyers were found, it eventually sold more than half of its stake to the state-owned insurance firm LIC.

IDBI Bank was penalised by the Reserve Bank of India (RBI) in 2017 with several restrictions on lending after its bad-loan ratio surged and capital ratios depleted.

In Q2, IDBI Bank reported a 46 per cent year-on-year rise in its net profit to Rs 828.09 crore. This is the lender's highest-ever quarterly profit.