The Indian government will allow a consortium of foreign funds and investment companies to own over 51% stake in state-owned IDBI Bank, according to a government clarification on Tuesday.

As per the current guidelines of the Reserve Bank of India (RBI), foreign ownership in new private banks is restricted.

The RBI's residency criteria for promoters applies only for newly set up banks and would not apply to an existing entity like IDBI Bank, the Department of Investment and Public Asset Management said in a response to interested bidders' queries.

"The residency criteria would not apply to a consortium consisting of funds investment vehicle incorporated outside India," the government clarification said.

The Indian government and the RBI would also consider relaxing the five-year lock-in period for shares if a non-banking financial company (NBFC) is merged into IDBI Bank, it added.

The clarifications come ahead of a 16 December deadline to submit expressions of interest for a majority stake in IDBI Bank. The government is trying to offload its stake in IDBI Bank.

The government and Life Insurance Corporation of India (LIC) together hold 94.71% in IDBI Bank and are looking to sell 60.72%.

The successful bidder will have to make an open offer for acquisition of 5.28% public shareholding.

Pursuant to the transaction, the government will own 15% stake and LIC 19% shareholding in IDBI Bank, taking their total holding to 34%.

Laying down the eligibility rules for bidding for IDBI Bank, DIPAM had earlier said potential investors should have a minimum net worth of Rs 22,500 crore and must report net profit in three out of the past five years. Also, a maximum of four members would be allowed in a consortium.

Carlyle Group, Fairfax Financial Holdings and DBS Bank are reportedly said to be considering to bid for at least 10% each in IDBI Bank.