In the event of a bank winning the bid to acquire IDBI Bank, the promoters will be given reasonable time to merge both entities to comply with the Reserve Bank of India’s norms for bank licensing, sources said.
Reports had suggested that Kotak Mahindra Bank and Fairfax India Holdings (promoter of CSB Bank), which are in the fray for IDBI Bank, want a two-to- three year window from the RBI for the merger with IDBI Bank in case they get to acquire the private bank.
“Time has to be given for the merger of two banks in case a bank wins the bid. Operational details have to be worked out with RBI on this, as only one bank licence will be available (for any promoter),” an official told FE.
According to RBI guidelines, in case a bank/promoter of a bank acquires another bank, a merger scheme has to be put forward immediately and the regulator will determine how it will be done.
In the Preliminary Information Memorandum for EoI, the government had said that “in the event, the Successful Bidder intends to amalgamate IDBI Bank with itself or if RBI requires the same, the GoI and LIC will vote in favour of any such merger/amalgamation at Board and/or shareholders’ meetings of IDBI Bank, along with such reasonable assistance as GoI may in its absolute discretion deem fit.”
With the government and LIC together to have a 34% residual stake in the lender (19% by LIC and 15% by the government) post disinvestment would have a major role to play in case of a merger of IDBI Bank with another lender. Both would have a stake in the merged entity.
On January 7, 2023 the Centre received multiple expressions of interest (EoIs) from domestic and foreign investors for the 60.72% stake in IDBI Bank, which will go to the successful bidder along with management control. The offer comprises 30.48% from the government and 30.24% from LIC, the current promoter.
Currently, the RBI is undertaking the “fit-and-proper assessment” of the bidders. Given that the RBI has yet to clear the bidders and elections are around the corner, the IDBI Bank sale will likely be concluded in the next financial year, FE had reported earlier.