This story is from June 13, 2016

IFC leads race to buy IDBI stake

IFC leads race to buy IDBI stake
(Representative Image)
New Delhi: World Bank's private sector lending arm International Finance Corporation (IFC) has emerged as the top contender to buy around 15% in governmentcontrolled IDBI Bank, even as talks have been held with at least three other players -GIC of Singapore, Asian Development Bank and Commonwealth Development Corporation.
The talks with IFC have entered final stages with negotiations having taken place at the top level last week, at least two sources told TOI.
The World Bank arm is looking for a greater say in running IDBI. IDBI Bank has seen several experiments over the last two decades and has been transformed from a development financial institution -specializing in term loans -to a retail bank. The bank, however, is saddled with legacy issues, a small base of lowcost current and savings bank deposits and a weak branch network.
Although the government was settling down to offering only around 10% to IFC, the new RBI guidelines have opened the doors for a larger share of the pie. Sources said the government has also discussed the modalities of the stake sale with Sebi and plans to sell the shares above the current market price. One of the options being considered was auction of shares, something that may be encouraged by the regulatory agency .
A senior IDBI Bank ex ecutive said the level of shareholding (stake to be acquired) is yet to be decided as due diligence has not started.Last Monday , the bank brass had a long meeting with minister of state for finance Jayant Sinha, who has been tracking the dilution of government equity . The government currently holds over 74% in the Mumbai-based lender, which reported an annual loss of Rs 3,664 crore during the last financial year due to a rise in bad debt. The government is open to reducing its stake below 50%, a first in the Indian banking space. Unlike the other nationalized banks or SBI, there is no floor on government shareholding in IDBI Bank.
The government is trying to rework the public sector architecture through a process of consolidation and in the first stage the SBI associate banks are proposed to be merged with the country's largest lender. The second part involves paring of stake in IDBI, which could be the model for other state-run lenders. But, the paring of stake in other banks will have to wait as the government will first need to amend the bank nationalization laws.
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