IDBI bank likely to be merged with private lender

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The government has appointed SBI Capital Markets in order to draw up the plans for the sale of the strategic stake held in IDBI Bank. It is open to many options including merger along with a non-state lender and the preferential allotments to the institutions of financial standing.

The other proposals that have come up in the early discussions comprise of a follow-on public offer as well as a sale to the institutional investors via the open market. These details have been revealed by a couple of people with knowledge of a couple of rounds of discussions.

This will require the permission of the Reserve Bank of India. As of now, the government owns a stake of 76.5 percent of IDBI Bank. This bank is governed by the IDBI Act and it can reduce the stake with approaching the Parliament. This is not the case with the other state-run banks in which the government can keep a maximum of 52 percent.

The country’s largest bank’s investment banking arm will look after the valuation, various divestment models and selling of overseas liabilities and assets.

As per a senior government official, the prime idea is to recognize the core assets of the IDBI Bank. The regulatory steps will be required in order to bring the government stake down.

The possible merger partners can include entities that have got approval to set-up banks lately. The valuation method will be carried out in a transparent way to safeguard the process from the legal challenges.

Last month, Jayant Sinha, the Minister of State for Finance stated that the government was planning to transform the IDBI Bank in a way similar to that of Axis Bank. The Axis Bank was formerly known as UTI Bank. The government is planning to raise around Rs 69,500 crore from the assets last year.

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