Government to allow more than 51% foreign ownership in IDBI Bank

 

The government last week clarified that the norms applicable to public sector banks will not apply to IDBI Bank after the government and LIC sold their stake, even though they together will continue to hold about 33% in the bank.

• This is set to spur investor interest in the bank's ongoing disinvestment process, where the government and Life Insurance Corporation of India are selling 60.72% stake and transferring management control to the winning bidder.

NEW DELHI: Foreign funds, investment vehicles incorporated outside India can own more than 51% in IDBI Bank, the government said in a clarification, noting that promoters are eligible under the Reserve Bank of India's guidelines for new private banks. The residency criteria for such funds will not apply to consortia.

This is set to increase investor interest in the bank's ongoing disinvestment process, where the government and Life Insurance Corporation of India are selling 60.72% stake and transferring management control to the winning bidder.

"Promoter's residency requirement, under RBI's "Guidelines for 'On Tap' Licensing of Universal Banks in the Private Sector, 2016", with reference to new/prospective banks. However, IDBI Bank is an existing banking company; therefore, For the purposes of the transaction, the said residency criteria shall not be applicable to a consortium of funds/investment vehicle incorporated outside India," the Department of Investment and Public Asset Management (DIPAM) said in response to queries from interested bidders.

One of the questions on the eligibility criteria sought clarity on whether a consortium can consist only of funds or investment vehicles incorporated outside India or non-residents, and this non-official financial holding owns more than 51% in the NOFHC structure. or if any investment vehicle is incorporated outside India.

The government also said it may consider relaxing the five-year lock-in period for shares if the non-banking financial company or NBFC is merged with IDBI Bank.

Responding to queries, DIPAM said, "The lock-in requirements in the event of such amalgamation will be suitably addressed in consultation with the Reserve Bank of India."

The government had clarified last week that the norms applicable to public sector banks would not apply to IDBI Bank after the government and LIC sold their stake, even though they together would continue to hold around 33% in the bank. The government has also said that IDBI Bank will continue to function as a private sector bank even if it is taken over by a foreign bank.

The government also clarified that it has applied for reclassification of its shareholding as a public shareholder, in response to a question whether the Center and LIC would retain any board seats or participate in the management and governance of IDBI Bank after the sale. Will take

Currently, the government and LIC hold more than 94% stake in the bank. Both are classified as promoter shareholders.

The government also said that the minimum public shareholding norms (MPS) imposed by the Securities and Exchange Board of India were also being examined and that a suitable transition period for MPS compliance was also under consideration.