Why Modi government is restarting privatization process of IDBI Bank

Why Modi government is restarting privatization process of IDBI Bank

The Indian government is likely to restart the privatization process of IDBI Bank from scratch, as financial bids fell short of the reserve price.

The move comes after the earlier process was canceled last week.

A ministerial panel overseeing the disinvestment will be briefed soon and is expected to take a final decision on this matter.

Government, LIC hold 94% stake in IDBI Bank

The government owns a 45.48% stake in IDBI Bank, while Life Insurance Corporation of India (LIC) holds 49.24%. The remaining shares are with the public. Since the bids were scrapped, IDBI Bank's stock has fallen 19%, closing at ₹74.28 on the National Stock Exchange yesterday.

Existing bidders may not need regulatory approvals again

Fairfax Financial, which is led by Prem Watsa, and Emirates NBD are said to have submitted financial bids for IDBI Bank.

Despite restarting the process by the government, the existing bidders may not have to seek regulatory approvals again if they decide to reapply, thus potentially speeding up the procedure.

Successful bidder will have to pass final test by RBI

All new submissions will be evaluated as per guidelines.

There are no plans to merge IDBI Bank with any other state-run lender.

The successful bidder will have to pass a final test by the Reserve Bank of India to ensure it is 'fit & proper.'

Approvals from statutory and regulatory authorities including the Competition Commission of India will also be needed.