IDBI Bank strategic sale to proceed without delays with RBI’s advance nod; due diligence in Nov

IDBI Bank strategic sale to proceed without delays with RBI’s advance nod; due diligence in Nov

The strategic stake sale in IDBI Bank is expected to move ahead without further delay as the government has secured 'a priori' approval from the Reserve Bank of India (RBI) to ensure that no regulatory hurdles are left unaddressed. Due diligence by prospective bidders is set to kick off in November, according to a senior government official.

“The RBI has already completed its due diligence of the bidders. We plan to open the data room for due diligence in November. This will streamline the strategic sale of IDBI Bank, making it quicker,” the official told Moneycontrol. He added that the finance ministry is keen on maintaining the momentum for the sale.

During the due diligence process, bidders will have access to the bank’s legal documents and can request additional information that will be made available in the data room. “The government wants to ensure that bidders are comfortable with the process. The finance ministry is committed to avoiding any delays on its part,” the official emphasised.

While regulatory approvals are not typically required before such sales, the unique nature of IDBI Bank's strategic sale—being in the banking sector—necessitated the government to obtain the a priori approval from the RBI.

"The RBI, as the sector's regulator, issues banking licences, and any acquisition in this sector must be closely monitored. The central bank needed to ensure that the strategic sale of IDBI Bank was fit and proper. This (prior approval) was sought to avoid complications later on as a double check. The IDBI Bank strategic sale criteria was prepared in consultation with the RBI. And, now, before the finance ministry has decided to proceed, the RBI has done the due diligence of all bidders,” the official explained.

This marks a significant development, as the sale of IDBI Bank is unique in India’s banking sector. “It was crucial to get the RBI’s 'fit and proper' clearance for the sale. Without it, the process could have faced uncertainties later. The delays up to now were due to the government and the RBI navigating the complexities of this first-of-its-kind transaction,” he added.

To ensure a smooth process, the finance ministry, RBI, and the Securities and Exchange Board of India (Sebi) have collaborated on finalising the sale criteria for IDBI Bank, preparing the groundwork for what is expected to be a landmark transaction in the banking sector.