Authority: Securities and Exchange Board of India (SEBI)

Order Date: Application dated May 13, 2026 (No order issued yet; this is a request for guidance)

Case Overview

IDBI Bank Limited has submitted an application under the SEBI (Informal Guidance) Scheme 2025 seeking clarification on the regulatory permissibility of selling unlisted equity shares it holds. This request was prompted by an advisory letter from the Department of Financial Services (DFS), Ministry of Finance, dated January 15, 2026. The DFS letter, based on SEBI's own observations, advised IDBI Bank and other Public Sector Banks to restrict the sale of equity shares in unlisted companies exclusively to Qualified Institutional Buyers (QIBs). SEBI had expressed concern to the DFS that some PSBs were issuing public advertisements or Requests for Proposal (RFPs) for such sales, which could violate the deemed public issue provisions under Section 42 of the Companies Act, 2013 and the Companies (Prospectus and Allotment of Securities) Rules, 2014.

IDBI Bank holds these unlisted shares primarily through three avenues: (a) as part of the restructuring or resolution of stressed loan accounts or the invocation of pledges; (b) from direct acquisition as investments; and (c) from in-specie distributions by Venture Capital Funds (VCFs) or Alternative Investment Funds (AIFs) at the end of their tenure. The Bank describes these holdings as often illiquid, subject to litigation or NCLT proceedings, and from companies in financial distress, which creates challenges in monetizing them and results in capital being locked in.

To facilitate recovery and capital optimization, the Bank proposes to sell these shares through bilateral, privately negotiated transactions with identified investors, explicitly avoiding any public advertisement, RFP, or general solicitation. The Bank emphasizes these are purely secondary market transfers with no fresh issuance of securities by the underlying companies. The Bank seeks specific guidance on three questions:

1. Whether such a private sale to identified non-QIB investors (including individuals, corporate entities, and the company's promoters) would be construed as a deemed public issue under the Companies Act, 2013 and its associated Rules.

2. Whether the Companies Act or other rules mandate that such transactions must be restricted exclusively to QIBs, or if private sales to non-QIBs are permissible.

3. Whether the Bank is entitled to transfer these shares to the company's promoters if contractual arrangements, such as a right of first refusal (ROFR) or a first right to purchase, exist.

The application includes proof of a fee payment of ₹59,005.90 (including ₹9,000 GST) made to SEBI on May 12, 2026, for this interpretive letter request.

Final Outcome

As this document is an application submitted to SEBI, there is no final outcome or ruling from the regulator included. The matter is pending SEBI's consideration and response under its Informal Guidance Scheme. The practical consequence for IDBI Bank is a hold on its proposed sales strategy until it receives regulatory clarity from SEBI.

Topics: SEBI Guidance, Unlisted Shares, Deemed Public Issue