Earlier, it was expected to be floated in September.
With the regulators – Reserve Bank of India (RBI) and market regulator Sebi — willing to provide the required flexibility in norms, the government is set to float the EoI.
The RBI and the Securities and Exchange Board of India (Sebi) are understood to have agreed to provide a flexible glide path to reduce the promoter’s (acquirer’s) stake in the bank once the transaction is over.
To make the deal attractive, the government had urged the RBI to give the potential buyer some leeway in complying with the regulatory norms meant for private banks, including a time-bound reduction in promoter holding. The buyer may get 10-15 years to reduce their stake in the bank to the desired level of 26%.
Even though the exact size of the stake dilution is not yet clear, the government and promoter Life Insurance Corporation (LIC) may together offer to offload up to 60% stake in the lender.
The share price of IDBI Bank closed at Rs 40.45 on the BSE on Tuesday, up 0.37% from the previous closing price. Currently, LIC (49.24%) and the government (45.48%) hold a 94.78% stake worth about Rs 41,200 crore in IDBI Bank at the current market prices.
While the Centre is keen to conclude the transaction during the current financial year, it may spill over to next year. Banks, non-banking financial companies and private equities evinced interest in the IDBI Bank’s stake in informal interactions with the government.
The IDBI Bank sale may provide a template for the privatisation of public sector banks as per the new public sector enterprises policy.
Following improvement in asset quality, the IDBI Bank exited the prompt corrective action (PCA) framework of the RBI in March 2021. After a gap of five years, it was back in the black with a net profit of Rs 1,359 crore for FY21. It posted a net profit of Rs 2,439 crore in FY22.