IDBI Bank’s recent business activities like the strategic sale have put many things into perspective while also raising a few doubts. As per latest updates, a government clarification on Tuesday reportedly mentioned that the Central Government will now allow foreign funds to own over 51 per cent in the bank. With this clarification, it is being understood that a consortium of foreign funds and investment companies will now reportedly have a stake in the state-owned IDBI Bank.
According to a Livemint.com report, the present rules by the Reserve Bank of India (RBI) restrict foreign ownership in new private banks. However, with the new clarification from the Centre, things seem to be changing.
As per the report, in a reply to interested bidders’ questions, the Department of Investment and Public Asset Management clarified that the RBI’s residency criteria for promoters applies only for newly set up banks. This does not mean that it will apply to an existing entity like IDBI Bank. The official clarification, as per the report, reads, “The residency criteria would not apply to a consortium consisting of funds investment vehicle incorporated outside India.”
The publication also added that the government and the central bank may also consider relaxing the five-year lock-in period for shares. However, this would happen if a non-banking financial company gets merged into IDBI Bank.
As of now, the government and LIC together hold 94.72 per cent stake in IDBI Bank. On October 7, the government invited bids for privatising IDBI Bank and said that it, together with LIC, will sell a total of 60.72 per cent stake in the financial institution.