IDBI Bank’s shares experienced a significant boost on Thursday, soaring nearly 7% during intra-day trading. This surge follows reports that the Reserve Bank of India (RBI) has deemed the potential bidders as “fit and proper,” thereby accelerating the IDBI Bank’s privatization divestment process.
The bank’s stock hit a high of ₹94 on the Bombay Stock Exchange (BSE) before settling at ₹92.19, marking a gain of 4.86% from the previous close. The rise in IDBI Bank shares prices comes on the heels of a media report indicating that the RBI had reviewed and approved the bidders based on fit and proper criteria, which ensure compliance with both local and international regulations. Notably, one bidder did not provide the required information, which led to some delays.
With the RBI’s approval, the government is poised to advance with its IDBI Bank’s Privatization, which were initially outlined in the Union Budget for the fiscal year 2021-22. Finance Minister Nirmala Sitharaman is anticipated to make a formal announcement regarding the next steps for privatization in her upcoming budget presentation next week.
Government Moves Forward with IDBI Bank’s Privatization
In October 2022, the Department of Investment and Public Asset Management (DIPAM) initiated the process of selling a 30.48% stake in IDBI Bank, alongside a 30.24% stake in Life Insurance Corporation (LIC). The government and LIC currently hold a combined 94.72% stake in IDBI Bank, with the government’s share at 45.48% and LIC’s at 49.24%. Following the strategic sale, these holdings are expected to reduce to 34%.
In March, Fairfax Financial, a Canadian investment holding company, reportedly enhanced its offer for IDBI Bank’s Privatization by submitting a new proposal to the Centre. This revised proposal included an all-cash deal, demonstrating a heightened interest in acquiring the bank.
DIPAM has set specific criteria for potential buyers, including a requirement for a minimum net worth of ₹22,500 crore and a record of net profit in at least three out of the past five years. These conditions are designed to ensure that only financially robust and stable entities are considered for the acquisition.
The accelerated divestment process is expected to attract significant interest from both domestic and international investors. The RBI’s clearance of bidders marks a crucial step forward in the privatization journey of IDBI Bank, which has been a key focus of the government’s strategy to enhance the efficiency and competitiveness of the banking sector.
As the process progresses, stakeholders are keenly awaiting further developments, including the formal announcement from Finance Minister Nirmala Sitharaman. The successful privatization of IDBI Bank’s privatization is anticipated to not only impact the bank’s operational dynamics but also contribute to the broader goals of financial sector reforms and economic growth.
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