IDBI Bank seeks RBI approval for Rs 1,500-cr PE fund

IDBI Bank has revived its plans for entering the private equity (PE) business. The bank has sought permission from the Reserve Bank of India (RBI) again to foray into the segment and is targeting a corpus of Rs 1,000-1,500 crore for its first fund.

Initially, it intends to tap domestic sources to raise funds and may look at tapping overseas investors later from second fund onwards, a bank executive said.

The bank approached RBI for a second time in August this year. The erstwhile development financial institution had approached the regulator in 2007 to get into the private equity business. While no formal proposal was moved, RBI had then advised the bank to concentrate on its upcoming life insurance business. Its joint venture with Fortis and Federal Bank is now up and running.

Many Indian public sector banks are now looking at private equity arena as part of their attempt to become conglomerates with presence across segments.

While the State Bank of India had proposed a private equity fund targeted at small and medium enterprises and the infrastructure sector, the proposal ran into opposition at the board level itself with the RBI representative, Deputy Governor Shyamala Gopinath, opposing the move.

Among the private players, ICICI Bank and Axis Bank already have a private equity arm, while others such as Yes Bank are planning to put in place two-three funds next year. Public sector lender Canara Bank has been aggressive in the venture capital space and has invested in over 80 companies.

IDBI Bank’s proposal has been cleared by its board and this time, it hopes to get the RBI approval too. The plan is to start the private equity business during the next financial year.

Sources said that the legal structure will be in place soon and the business will have two verticals – national and international – for fund raising activity. The details will be thrashed out soon.