The government plans to sell a 60.72% stake in IDBI Bank. Credit: Towfiqu barbhuiya on Unsplash.

The Indian government has confirmed that a consortium of foreign funds and investment entities would be allowed to own more than 51% stake in IDBI Bank.

Responding to a potential bidder’s queries, the Department of Investment and Public Asset Management (DIPAM) said as per the Reserve Bank of India’s current guidelines, the residency requirement of the foreign owner is in the context of new/prospective banks.

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“However, as IDBI Bank is an existing banking company; hence, for the purposes of the transaction, the said residency criteria would not apply to a consortium consisting of funds/ investment vehicle incorporated outside India,” DIPAM said.

The development comes before the 16 December deadline for bidders to submit an expression of interest (EoI) for acquiring a majority stake in the lender.

DIPAM, which is part of the Union Finance Ministry, also said that if IDBI Bank merges with a non-banking financial company (NBFC)/banking company, the government and the central bank will waive the five-year lock-in term of shares.

“The lock-in requirements in event of such amalgamation shall be addressed suitably, in consultation with RBI, on a case-to-case basis,” the official statement read.

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In October 2022, the government invited bids for the bank and said that together with the Life Insurance Corporation of India (LIC ), it will be selling a 60.72% stake in IDBI Bank.

Earlier, DIPAM had informed potential bidders that IDBI Bank “shall post consummation of the transaction continue to function and operate as an Indian private sector bank.”

Fairfax Financial, DBS Bank, and Carlyle Group are among those considering a bid for at least 10% of IDBI Bank, Live Mint reported, citing sources.