Fairfax, Emirates NBD, Kotak Mahindra Bank Lead Race For IDBI Bank

Fairfax Financial Holdings, Emirates NBD, and Kotak Mahindra Bank Ltd. have made it to the final list of bidders for IDBI Bank, according to people with knowledge of the matter.

These bidders have successfully cleared the Reserve Bank of India's (RBI) fit and proper checks, paving the way for the next stage of the bidding process and the shortlisted bidders will soon be granted access to IDBI Bank's data room, enabling them to conduct due diligence, the people said, adding that this process is complete, they will submit their final bids.

The development comes as the government is planning to sell a 60.7% stake in the state-run lender held by them and the Life Insurance Corporation of India.

Fairfax, Emirates NBD, and Kotak Mahindra Bank did not immediately respond to NDTV Profit's requests for comment.

Prem Watsa-owned Fairfax Financial already has a strong presence in the financial services space in India. While Fairfax Financial currently holds a 40% equity stake in CSB Bank, it also holds 15.22% in IIFL Finance.

According to the first of the two people quoted above, an acquisition of IDBI Bank will mean that Fairfax may be forced to merge the lender with CSB Bank.

Kotak Mahindra Bank, which saw Ashok Vaswani take over as MD and CEO only in January, is in the midst of regulatory challenges of its own. On April 24, the RBI announced fresh restrictions on Kotak Mahindra Bank, barring it from onboarding customers through digital means. The regulator also barred the lender from bringing on any new credit card customers.

The restrictions were due to serious concerns over Kotak Mahindra Bank's IT infrastructure. The bank is working on fixing the gaps identified by the regulator. A merger in the middle of such a process might prove to be challenging.

While Emirates NBD is present in India, it only serves businesses that are active in India and the Middle East. The UAE-based lender will likely want to expand its India presence through IDBI Bank's Rs 3.3 lakh crore balance sheet, its over 2,000 branches and its over 3,000 ATMs.

The sale process for IDBI Bank has been a long-standing proposal for the government since late former Union Finance Minister Arun Jaitley announced it in 2016. In 2019, the government sold the majority stake in IDBI Bank to the Life Insurance Corporation of India. However, this was only a temporary arrangement and true disinvestment started in 2022.

The government had then announced the sale of its 30.48% government stake in IDBI Bank and an additional 30.24% owned by LIC. The successful buyer will get material control over IDBI Bank; however, the government will continue to be a minority shareholder.

As of June 30, the government owns 45.48% and LIC owns 49.24% of IDBI Bank, according to exchange data.