The central government and LIC have decided to sell 60.72 per cent stake in IDBI Bank and transfer management control to the winning company.
IDBI Bank was placed under the RBI’s PCA from May 2017 to March 2021 due to poor credit quality. Two months after the situation stabilized and IDBI exited, the Cabinet Committee on Economic Affairs approved the sale of stake in the bank and transfer of management control. Those activities have now started. If the sale of IDBI Bank is completed this fiscal, the central government will contribute Rs 65,000 crore to raise through its share sale this fiscal. The government has already raised Rs 24,544 crore. A major part of it came from the sale of shares in LIC.
2 Phases to Privatize Banks
The government will follow a two-phase process to privatize public sector banks. As a first step bidders who meet the initial eligibility criteria will have to complete the RBI’s Fit and Legitimate Institutional Assessment. and obtain a security clearance from the Ministry of Home Affairs. Qualified bidders after completing the first phase will be allowed to enter the second phase. There bids will be solicited under confidentiality clause.
Sale of 60% shares
A preliminary information memorandum issued by the Department of Investment and Public Asset Management outlines the criteria and process for bidders. LIC holds 49.24% stake in IDBI Bank. 30.24% of which are selling shares. The central government is selling 30.48% of its 45.48% stake. 5.28% shares are held by the public. Prospective bidders have been given a deadline of December 16 to submit their bids.
The bidding company should have a minimum net worth of Rs 22,500 crore as per latest audited financial statements. They are also required to submit profit and loss statements for three of the last five financial years. A maximum of four members are allowed in a consortium. The lead member should hold 40% of the shares and each member should have at least 10% of the shares.
Listed private banks, foreign banks, RBI registered non-banking financial institutions, SEBI registered alternative investment funds are allowed to participate in the auction. The government will ban companies from countries that share land borders with India.
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