Government Looks To Close IDBI Bank Sale Before Election Preparation Begins — BQ Exclusive

The government has been conducting bilateral meetings with a select group of bidders and is keen on closing the transaction by March 2024. The select group likely includes Prem Watsa's Fairfax, Kotak Mahindra Bank and private equity investor Avenue Capital, among others, the people quoted above told BQ Prime on the condition of anonymity.

While negotiations have been going on in full swing, the Department of Investment and Public Asset Management has also been trying to get the Reserve Bank of India to fast-track the fit and proper check process.

The Indian central bank is likely to close the fit and proper checks this month, according to a Reuters report on Thursday. While BQ Prime was not able to independently verify this, a person with knowledge of the RBI's deliberations said that no clear timeline had been agreed to yet.

A fit and proper check by the banking regulator will be crucial in closing the sale. Previously, the RBI has taken a tough stance on the kinds of borrowers who may qualify for buying stakes in IDBI Bank.

The government had announced a formal sale process for IDBI Bank last year. Bidders can buy up to a 30.48% government stake in IDBI Bank and an additional 30.24% owned by the Life Insurance Corp. of India through the process. In January, the government received preliminary interest from a handful of potential bidders. Since then, DIPAM has been trying to close the sale.

Before the sale goes through, IDBI Bank is looking to offload stressed corporate accounts from its portfolio in an attempt to clean up the balance sheet.

According to the first person quoted above, the lender has a group of around 700 corporate accounts, with outstanding loans of over Rs 67,000 crore available for the clean-up process. Of these, around 250 accounts, with sticky loans worth Rs 36,000 crore, could be put up for sale to potential bidders.

As of June 30, IDBI Bank reported gross non-performing assets worth Rs 8,763 crore on its book. Over and above this, the lender has written off corporate loans worth Rs 59,756 crore.