India Removes Curbs on IDBI Bank Before Planned Sale

India’s banking regulator removed restrictions that limited IDBI Bank Ltd.’s ability to lend and expand, paving the path for a proposed sale.

The bank was within parameters of the so-called prompt corrective action plan at end-December, including on capital, bad loans, and leverage, the Reserve Bank of India said in a statement Wednesday. IDBI Bank was sanctioned in 2017 after its net bad-loan ratio breached 9.5%. It has since reported four straight quarters of net profit through December 2020.

IDBI Bank “has apprised the RBI of the structural and systemic improvements that it has put in place, which would help the bank in continuing to meet these commitments,” the RBI said.

The decision potentially allows Life Insurance Corporation of India -- which acquired 51% of IDBI Bank when it helped the government bail out the lender in 2019 -- to pare its stake. Offloading assets like IDBI Bank may also boost LIC’s valuations before its proposed initial public offering in the financial year starting April.

IDBI Bank’s shares have risen about 49% in the past year, compared with 33% for the broader banking gauge.

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