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According to a government clarification on Tuesday, the Central Government will be allowing a consortium of foreign funds and investment companies to own over 51% in state-owned IDBI Bank Ltd.

The current Reserve Bank of India (RBI) rules restrict foreign ownership in new private banks.

In reply to interested bidders' queries, the Department of Investment and Public Asset Management said the RBI's residency criteria for promoters applies only for newly set up banks and would not apply to an existing entity such as IDBI Bank.

"The residency criteria would not apply to a consortium consisting of funds investment vehicle incorporated outside India," the government clarification read.

It further said the government and the central bank would also consider relaxing the five-year lock-in period for shares if a non-banking financial company is merged into IDBI Bank.

The development come ahead of a 16 December deadline to submit expressions of interest or preliminary bids for a majority stake in IDBI Bank, one of the few lenders that the government is trying to offload its stake in.

Together, the government and the Life Insurance Corporation of India hold 94.71% in IDBI Bank and are looking to sell 60.72%.

The successful bidder would be required to make an open offer for acquisition of 5.28% public shareholding.

Pursuant to the transaction, the government will own 15% stake and LIC 19% shareholding in IDBI Bank, taking their total holding to 34%.

DIPAM had earlier said potential investors should have a minimum net worth of 22,500 crore and must report net profit in three out of the past five years to be eligible for bidding for IDBI Bank. Also, a maximum of four members would be allowed in a consortium.

The state-owned lender had a market capitalization of 630.09 billion and the shares of IDBI Bank were up 7.47% to settle at 58.30 on the NSE on Tuesday.

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