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Govt clarifies foreign funds can own over 51% stake in IDBI Bank

December 08, 2022

Govt clarifies foreign funds can own over 51% stake in IDBI Bank
The government on Tuesday said it will allow a consortium of foreign funds and investment companies to own over 51 per cent in IDBI bank, clarifying that foreign ownership criteria was for new private banks and were not applicable on existing ones.

This comes ahead of the December 16 deadline for potential bidders to submit expressions of interest (EoIs) for picking up majority stake in the private sector lender.

“The residency requirement of the promoter, under the Reserve Bank of India’s (RBI’s) guidelines, is in the context of new/prospective banks. However, as IDBI Bank is an existing company, for the purposes of the transaction, the said residency criteria will not apply to a consortium consisting of funds/investment vehicle incorporated outside India,” the Department of Investment and Public Asset Management (Dipam) said in response to a potential bidder’s queries on Tuesday.

At present, the RBI rules restrict foreign ownership in private banks.

Dipam also indicated that the government and the central bank will ease the five-year lock-in period for shares if the bank gets merged with a non-banking financial company (NBFC).

“The lock-in requirements in the event of such amalgamation shall be addressed suitably, in consultation with the RBI, on a case-to-case basis,” the department said, adding that the amalgamation of an NBFC/banking company with IDBI Bank will be guided by provisions of Banking Regulation Act, 1949, and the Master Directions on “Amalgamation of Private Sector Banks”, as amended from time to time.

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