IDBI Bank's Majority Stake Sale: RBI Assessing Potential Bidders, Says Report

The Reserve Bank of India is evaluating various bidders interested in purchasing a controlling share of IDBI Bank Ltd, a government-owned entity.

Kotak Mahindra Bank, Emirates NBD, and CSB Bank backed by Prem Watsa submitted an expression of interest for the stake, as per two anonymous sources citing confidentiality, reported Mint.

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

The sale of shares in the state-owned lender marks the initial major divestment in a larger privatisation scheme and may yield the government approximately $3.66 billion at current market value.

The Central Government plans to sell a 30.48 per cent stake in IDBI Bank, in addition to a 30.24 per cent stake by state-owned LIC, as part of divestment efforts. Presently, the Centre holds 45.48 per cent in the IDBI Bank and LIC holds 49.24 per cent.

Reportedly, according to the three individuals, the initial stage of the stake sale process, which involves expressions of interest, was concluded in January.

Before investors can acquire a stake in a local bank, the RBI is conducting a "fit and proper evaluation", which involves thorough background and financial checks, according to the report.

Questions about government control in IDBI Bank after the divestment have been raised by potential investors, as it will result in the government and a government company holding a combined 34 per cent stake.

"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."

According to Ashvin Parekh, a management consultant, buyers with an existing bank may have to merge their banking operations with IDBI due to RBI regulations prohibiting one investor from owning two banks.

He further stated that a merger could lead to a reduction in concerns over government control, as it would result in the dilution of equity held by both the government and LIC.