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    Govt expects clarity from RBI on IDBI bank divestment by month-end

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    Govt expects clarity from RBI on IDBI bank divestment by month-end

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    The sources are hopeful the banking regulator may be open to some of the relaxations sought by them, depending on the nature of the investor. For instance, on the five-year timeframe for promoter lock-in with a minimum of 40 percent ownership, the government views that some headroom and flexibility could be possible from the RBI.

    The central government is expecting clarity from the Reserve Bank of India on the IDBI Bank divestment matter before the end of July.
    Sources told CNBC-TV18 that if consultations with RBI are wrapped up this month, the government hopes to invite expressions of interest for the bank's sale by August
    The government is understood to have sought exemptions on the ownership cap for individual shareholders and private equity investors in private sector banks and also the 40 percent lock-in for promoters for a period of 5 years. The government has also sought clarity from RBI on which type of entities can form part of the bidder’s consortia.
    The sources are hopeful the banking regulator may be open to some of the relaxations sought by them, depending on the nature of the investor. For instance, on the five-year timeframe for promoter lock-in with a minimum of 40 percent ownership, the government views that some headroom and flexibility could be possible from the RBI.
    Also read:
    Both LIC and government will need to divest a substantial stake in IDBI Bank, if not exit the bank completely, to attract credible bids. LIC in the past has said they intend to retain some stake in IDBI for bancassurance which has the government’s in principle concurrence.
    For IDBI, In the third quarter of the financial year 2022 (Q3FY2023), gross non-performing assets (NPA) were 20.56 percent, down from 31.78 percent in Q2 FY19 when LIC injected capital into the bank. The government owns 45.48 percent of IDBI Bank, while LIC owns 49.24 percent.
    Why is the government disinvesting in IDBI bank?
    In Budget 2021, the Government of India announced its intention to exit IDBI Bank.
    The disinvestment strategy refers to the sale or liquidation of government-owned assets. Governments use disinvestment to reduce their fiscal burdens and raise money for public needs. They may also be done to privatise the assets.
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