IDBI Bank shares surge on RBI's 'Fit and Proper' report

18 Jul 2024 , 01:10 PM

Shares of IDBI Bank surged nearly 6% to ₹93 per share on July 18, following the Reserve Bank of India’s (RBI) issuance of a ‘fit and proper’ report on bidders, moving the divestment process forward.

At the time of writing on July 18, 2024 at 1:05 pm, shares of IDBI bank is currently trading at ₹92.86 which is a 5.67% gain than the previous close. The stock has gained a total of 62% in the last one year, and 37% in the beginning of the year. Earlier, IDBI Bank reached a 52-week high of ₹98 per share on February 6, 2024.

The privatisation of IDBI Bank has been anticipated for years, with market watchers closely monitoring the central bank’s assessment of bidders. The RBI’s evaluation ensures bidders meet the ‘fit and proper’ criteria, adhering to regulations for the next stage of privatisation.

The central government holds a 45.5% stake in IDBI Bank, while LIC is the largest shareholder with over 49%. The plan involves selling 60.7% of the bank, including the government’s 30.5% stake and LIC’s 30.2% stake.

Upon completing the vetting process, the government will allow qualified bidders access to confidential IDBI Bank data, covering employee pension funds, insurance, and medical coverage details.

To qualify, bidders must have a minimum net worth of ₹22,500 Crore and have reported net profits in three of the last five years. A bidding consortium can include up to four members, with the successful bidder required to lock in at least 40% of the equity capital for five years.

In its Q1FY25 business update, IDBI Bank reported a 13% year-on-year (YoY) increase in total deposits to ₹2.7 lakh Crore, up from ₹2.4 lakh Crore in the same period last year. Net advances also rose by 17% YoY to ₹1.9 lakh Crore in Q1FY25 from ₹1.65 lakh Crore in Q1FY24.

IDBI Bank Limited is a Scheduled Commercial Bank under the ownership of Life Insurance Corporation of India (LIC) and the Government of India. It was established by the Government of India as a wholly-owned subsidiary of the Reserve Bank of India in 1964 as the Industrial Development Bank of India, a Development Finance Institution providing financial services to the industrial sector.

IDBI was established in 1964 under an Act of Parliament as a wholly-owned subsidiary of the Reserve Bank of India. In 1976, ownership was transferred to the Union government, making it the principal financial institution for coordinating activities of institutions engaged in financing, promoting, and developing industry in India.

IDBI provided financial assistance in both rupee and foreign currencies for green-field projects, expansion, modernization, and diversification purposes. Following financial sector reforms since 1992, IDBI also provided indirect financial assistance through refinancing of loans by State-level financial institutions and banks and rediscounting of bills of exchange from the sale of indigenous machinery on deferred payment terms.