Reserve Bank Of India Begins Evaluating Potential Bidders For IDBI Bank

According to three sources familiar with the situation quoted by Reuters, the Reserve Bank of India (RBI) has started evaluating at least five potential bidders interested in acquiring a majority stake in state-owned IDBI Bank Ltd.

Two of the persons, who spoke on the condition of anonymity because the conversations are private, said that among the parties that have submitted expressions of interest are CSB Bank, Emirates NBD and Kotak Mahindra Bank.

The other prospective bidders' names could not be verified by Reuters. Requests for feedback from the RBI, Finance Ministry, IDBI, Kotak Mahindra Bank, CSB Bank, and Emirates Bank went unanswered.

As part of a larger privatisation plan, the stake sale in the lender is the first significant disposal across state-owned banks and may net the government 300 billion Indian rupees ($3.66 billion) at the current market valuation.

Along with the state-owned Life Insurance Corp of India (LIC), which would sell 30.24% of its 49.24% stake in the bank, the federal government, which controls 45.48% of IDBI Bank, will also sell a 30.48% interest in the bank..

The first round of the stake selling procedure, called expressions of interest, ended in January, according to the three persons. According to the people, the prospective buyers have since started their due diligence on the bank, and they said that financial offers were probably going to be made later this year.

Before allowing an investor to purchase a stake in a local bank, the RBI also conducts a "fit and proper evaluation" that includes thorough background and financial checks on the prospective buyers.

Given that the government would keep a 15% share in IDBI Bank and that LIC, a government-owned corporation, will hold a 19% stake, potential investors have expressed concern about the level of government control in the bank after the divestiture, according to two of the persons.

One person remarked, The government does not intend to have any managerial oversight. If a written submission to that effect is required, "the government will take a call.

According to business consultant Ashvin Parekh, buyers with an existing bank may eventually be obliged to consolidate the operation with IDBI due to RBI laws prohibiting the same investor from owning two banking firms.He noted that a combination might allay worries about government control by diluting the stock stakes that the government and LIC now hold.