The government has reached out to the capital markets regulator for a two-year relaxation in minimum public shareholding (MPS) norms for IDBI Bank once it is privatised, The Economic Times reported.
Firms are required to have a public shareholding of at least 25 per cent within three years of being listed. IDBI Bank is already listed but state-run enterprises are exempt from the minimum public holding rule.
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But IDBI Bank would need to comply with this rule within three years of being privatised. The relaxation is expected to make the strategic sale of the bank more attractive to a potential investor as there will be more time for complying with the norm, as per the report.
The government has sought additional two years, which will give the eventual strategic investor five years to comply with the minimum public holding rule.
If the exemption is not granted, the government can also request the regulator to treat its shareholding as public to meet the criterion.
Life Insurance Corporation (LIC) and the central government are likely to offer 60 per cent stake for sale in IDBI Bank, CNBC-TV18 reported on September 6. The Expression of Interest (EoI) for the divestment process will be invited by October.
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It was earlier reported that LIC and the government could sell up to 65 percent stake in IDBI Bank. The two owned close to 94 percent of IDBI Bank as of June 30, of which the Centre owned 45.48 percent and LIC 49.24 percent. The remaining 5.3 per cent is with the public.
At present, the government and LIC are categorised as promoters. They would need approvals for the reclassification of their shareholding status under present regulations.
The report quoted a government official as saying that IDBI Bank is a unique case because it’s no longer a state-run entity and yet falls under the minimum public shareholding exemption available to state-run enterprises.
The Reserve Bank of India (RBI) categorised IDBI Bank as a private sector bank for regulatory purposes with effect from January 21, 2019 after LIC acquired a majority stake in the lender.
The government had pumped Rs 27,000 crore into IDBI Bank between April 1, 2010 and March 31, 2021 pegging the average cost of acquisition of the stock at about Rs 60 apiece.
