Dubai's Emirates NBD eyes majority stake in India's IDBI bank after RBI approval
Dubai's largest lender, Emirates NBD, has gained a significant edge in its pursuit to acquire a majority stake in IDBI Bank, a prominent Indian lender, following the Reserve Bank of India's (RBI) "in-principle" approval to establish a wholly-owned subsidiary in India.
This strategic move enhances Emirates NBD's position as it competes with Canada's Fairfax Financial Holdings and India's Kotak Mahindra Bank to secure a 60.7 per cent stake in IDBI Bank, which is currently held by the Indian government (45.48 per cent) and the Life Insurance Corporation of India (49.24 per cent).
The RBI's approval allows Emirates NBD, which operates branches in Chennai, Gurugram, and Mumbai, to convert its existing operations into a wholly-owned subsidiary. Banking analysts highlight that this structure ring-fences a foreign bank's local operations, enabling it to operate on par with domestic banks.
While major foreign players like HSBC and Standard Chartered have avoided this model due to dual capital requirements — infusing capital into the subsidiary and holding additional capital against the investment — smaller lenders like DBS Bank and State Bank of Mauritius have successfully adopted it to expand in India.
For Emirates NBD, this approval underscores its commitment to deepening its footprint in India's rapidly growing banking sector.
In August 2024, Emirates NBD was shortlisted alongside Fairfax Financial and Kotak Mahindra Bank to bid for IDBI Bank as part of the Indian government's broader push to privatise state-owned banks and attract foreign investment. India's banking sector, with its robust growth and vast market potential, has drawn increasing interest from global financial institutions.
Emirates NBD's bid reflects its strategic ambition to capitalise on these opportunities, with the outcome expected to shape IDBI Bank's future and influence India's banking privatisation landscape.
The UAE lender's financial strength bolsters its bid. In the first quarter of 2025, the bank reported a 56 per cent surge in profit before tax to Dh7.8 billion, driven by strong lending, an improved deposit mix, and new product offerings. Its balance sheet crossed the Dh1 trillion mark, fuelled by a vibrant regional economy, with deposits rising 5.0 per cent, including a record Dh27 billion increase in low-cost current and savings accounts. Loan growth reached Dh18 billion, with over half attributed to its expanding international network.
IDBI Bank, the acquisition target, reported a 26 per cent increase in net profit to Rs20.51 billion for the March quarter of FY25, up from Rs16.28 billion the previous year. Total income grew to Rs90.35 billion from Rs78.87 billion, reflecting its strong operational base. However, the bank has faced challenges, including asset quality issues and regulatory scrutiny, making its privatisation a critical step toward injecting capital and expertise to enhance competitiveness.
Emirates NBD's extensive experience across the Middle East and North Africa, coupled with its track record in managing large-scale acquisitions, positions it as a formidable contender.
Fairfax Financial, a Canadian investment firm, aims to expand its Indian financial market presence, while the LIC-led consortium leverages significant local expertise. The bids will be evaluated based on financial stability and strategic vision, with Emirates NBD's operational excellence giving it a competitive edge.
The privatisation of IDBI Bank aligns with India's goals of improving public sector efficiency and encouraging private investment. A successful acquisition is expected to strengthen IDBI Bank by fostering innovation and best practices, contributing to the broader health of India's banking sector.
As the bidding process advances, industry observers are keenly watching how Emirates NBD and its competitors address IDBI Bank's challenges and capitalise on its opportunities. The outcome will likely set a precedent for future privatisation efforts, marking a pivotal moment for India's financial landscape.
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