IDFC soars after RBI OKs exit as promoter of IDFC First Bank

IDFC jumped 12.61% to Rs 59.40 after the company said that the Reserve Bank of India (RBI) has allowed the firm to exit as the promoter of IDFC First Bank as the five-year lock-in period expires.

The five-year lock-in period ended on 30 September 2020. IDFC currently owns a 100% stake in IDFC Financial Holding Company, which, in turn, holds 100% in IDFC Asset Management and 36.56% in IDFC First Bank.

The IDFC Bank was created by the demerger of the infrastructure lending business of IDFC to IDFC Bank in 2015.

RBI had granted IDFC a banking licence in April of 2014 pursuant to the February 2013 universal bank licensing guidelines. These guidelines mandated IDFC create a non-operative financial holding company (NOFHC) structure to house the bank and other financial services units of the parent company to ensure the banking business was completely ring-fenced from other activities of the firm.

The parent company IDFC was also mandated to hold a minimum of 40% stake in the bank, locked in for the first five years, and thereafter reduce it to 15% over ten years.

According to reports, the RBI's latest internal working group recommendations propose that the cap on promoters' stake, in the long run, may be raised from 15% to 26% of the paid-up voting equity share capital of private banks.

IDFC is a finance company. It provides finance and advisory services for infrastructure projects as well as asset management and investment banking.

The company reported a standalone net profit of Rs 25.85 crore in Q4 FY21 as against a net loss of Rs 70.43 crore in Q4 FY20. Total income was at Rs 30.89 crore in Q4 FY21.

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