IDBI Bank to continue primary dealer business even if foreign bank acquires majority stake
IDBIs treasury actively participates in primary auction of government bonds.In response to a query on the primary dealership activities undergoing changegetting impacted, where a foreign bank acquires more than 50 per cent shareholding and management control in the strategic sale, the Department of Investment and Public Asset Management DIPAM said, There may not be any impact on the primary dealer business of the IDBI Bank. Primary dealers are RBI registered entities that buy and sell government bonds.
IDBI Bank would continue its primary dealer business even if a foreign bank acquires majority stake and management control in the private sector bank, the finance ministry said on Tuesday.
As part of the primary dealer activity, IDBI Bank is involved in market making activities in respect of G-Secs, including T-bills. IDBI's treasury actively participates in primary auction of government bonds.
In response to a query on the primary dealership activities undergoing change/getting impacted, where a foreign bank acquires more than 50 per cent shareholding and management control in the strategic sale, the Department of Investment and Public Asset Management (DIPAM) said, ''There may not be any impact on the primary dealer business of the IDBI Bank.'' Primary dealers are RBI registered entities that buy and sell government bonds. They have the licence to buy government securities (G-secs) directly from the central bank and sell them to other buyers, thereby creating market for G-Secs.
The clarification is part of the supplementary responses to queries received from interested bidders for IDBI Bank. The first set of responses were released last month.
The DIPAM had then clarified that IDBI Bank will continue to operate as an 'Indian private sector bank' after its strategic sale even if the successful bidder is a foreign bank.
The government had on October 7 invited bids for privatising IDBI Bank and said that it along with LIC will sell a total of 60.72 per cent stake in the financial institution. The last date for putting in Expression of Interest (EoI) or preliminary bids is December 16.
The government and LIC together hold 94.72 per cent stake in IDBI Bank and have offered to sell 60.72 per cent stake in the bank. The successful bidder would be required to make an open offer for acquisition of 5.28 per cent of the public shareholding.
Interested bidders would have to clear RBI's 'Fit & Proper' assessment and get security clearance from the government/home ministry in the EoI stage itself to be able to access IDBI Bank's data room for due diligence.
The DIPAM had earlier said that potential investors should have a minimum net worth of Rs 22,500 crore, must report net profit in three out of the past five years to be eligible for bidding for IDBI Bank.
Also, a maximum of four members would be allowed in a consortium. The successful bidder would be required to mandatorily lock-in at least 40 per cent of the equity capital for five years from the date of acquisition.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)