reserve bank of india: Govt to discuss IDBI sale plan with Reserve Bank of India

NEW DELHI: The government appears open to a consortium of bidders, possibly including corporate houses, taking over IDBI Bank through the privatisation process and may seek a longer timeframe from the Reserve Bank of India (RBI) to enable the new owners to reduce their stake to 26%.
Last year, the banking regulator changed norms to allow promoters of private banks to hold up to 26% stake, instead of 15% earlier, after 15 years. Promoters have been allowed to pare their holding below 26% after five years.
Government officials said that 74% foreign investment was allowed in the banking sector and clarity on the stake reduction path will help clear the air.

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Government sources told TOI that a consortium of bidders will also help address concerns over concentration of shareholding in a few hands, something the RBI has always been wary of.
While the RBI has not announced its decision on an internal working group’s recommendation to allow corporate houses to enter the banking arena, government sources indicated that the proposal has not been dropped and said a favourable view from Mumbai’s Mint Road will aid the IDBI Bank privatisation process.
While the IDBI Bank sale plan has been pending for a long time, Dipam has begun roadshows based on which the selloff plan will be readied. Officials said based on discussions with the regulator, the government will work out the plan as several issues need to be decided upfront to provide clarity to potential buyers.
Besides, the model may be used to privatise two nationalised banks, a decision that was announced in 2021 but the government has not moved on it, including amen- ding the law to allow private ownership of these banks.
With a 49% stake, LIC is the largest shareholder in IDBI Bank, while the government currently holds 45. 5%. The two, which make up the promoter group, will decide on the quantum of reduction in shareholding after clarity on several issues from the RBI. In the past, the RBI has refused to provide a separate dispensation for IDBI Bank and suggested that the rules of the game should be same for all players.
The bank’s stake sale has been discussed for nearly a decade now but the government has not been able to find the right model for it. On Thursday, the bank’s shares rose 0. 7% to close at Rs 37 on the BSE.

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