Emirates NBD Withdraws from IDBI Bank Acquisition, Sets Sights on RBL Bank
Emirates NBD, a leading banking group in the Middle East, has reportedly abandoned its plans to acquire a significant stake in IDBI Bank, an Indian government-owned bank. The Dubai-based financial institution is now said to be seeking a majority stake in RBL Bank, another Indian banking entity, according to sources cited by The Hindu Businessline.
Background of the Proposed IDBI Bank Acquisition
Earlier this year, Emirates NBD proposed a substantial investment in IDBI Bank, offering between $6 billion and $7 billion for a 61% stake. The plan emerged following discussions with the Department of Investment and Public Asset Management (DIPAM), an agency under the Indian Ministry of Finance responsible for managing government investment in public sector enterprises.
However, due to delays in finalizing the IDBI Bank deal, Emirates NBD is said to be shifting its focus towards RBL Bank.
Emirates NBD’s Potential Majority Stake in RBL Bank
A source cited by The Hindu Businessline stated, “Emirates NBD is very close to acquiring a major stake in RBL Bank, in phases. The government and regulator are both keen on bringing foreign investors into domestic banks, given the added pressure on account of tax rate cuts and US tariffs.”
This comes after Emirates NBD received an ‘in-principle’ approval from the Reserve Bank of India (RBI) in May to establish a wholly-owned subsidiary in India.
Indian Regulations on Foreign Investments in Banks
Regulations in India currently permit foreign players, including portfolio investors, to hold up to a 74% stake in Indian banks. However, strategic foreign investors are restricted to a 15% limit. Despite the potential for Emirates NBD to acquire a significant share in RBL Bank, RBI regulations are expected to limit its voting rights to only 26%.
Emirates NBD’s Proposed Transaction with RBL Bank
Reports suggest that Emirates NBD is close to finalizing a deal that could see the Dubai-based bank taking over up to a 60% stake in RBL Bank, valued at approximately $3 billion. The initial phase of this transaction would involve purchasing a 26% stake from existing institutional investors, followed by a public offer to acquire an additional 25%.
Through their strategic investment plans, Emirates NBD demonstrates their commitment to expanding their presence within the Indian market, despite the regulatory constraints in place.
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