NEW DELHI: The central government has allowed a consortium of foreign funds and investment companies to own more than 51 per cent in IDBI Bank, the Department of Investment & Public Asset Management (DIPAM) said on Tuesday. According to the current norms of the Reserve Bank of India (RBI), foreign entities can’t have ownership in new private banks.
“The residency criteria would not apply to a consortium consisting of funds investment vehicles incorporated outside India,” the government said in a reply to interested bidders' queries section. It also added that it would consider relaxing the 5-year lock-in period for shares if a non-banking financial company (NBFC) is merged into IDBI.
Besides this, the government said IDBI would continue with its primary dealer business even if a foreign bank acquires majority shareholding and management control in the private sector bank. As part of the primary dealer activity, IDBI is involved in market-making activities in respect of G-secs including t-Bills. IDBI’s treasury also provides constituent subsidiary general ledger (CSGL) service to Gilt accountholders having accounts with it.
The government on October 7 had invited bids for the EoI of IDBI Bank for which the last date is December 16. Both government and the Life Insurance Corporation (LIC) hold 94.71 per cent in IDBI Bank. The government is looking to offload 60.72 per cent in the state-owned bank. The successful bidder will have to make an open offer of acquisition of 5.28 per cent of the public shareholding.
Earlier, DIPAM had said that the potential buyers should have a minimum net worth of Rs 22,500 crore and must report a net profit in three out of the last five years to qualify to bid for the bank. In addition, a maximum of four members would be permitted in a consortium.
Also, the successful bidder would be required to mandatorily lock in at least 40 per cent of the equity capital for five years from the date of acquisition.