The current guidelines of the Reserve Bank of India restrict foreign ownership in new private banks. The central bank'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," it 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 is merged into IDBI Bank, it said.

The clarifications come ahead of a Dec. 16 deadline to submit expressions of interest for a majority stake in IDBI Bank, one of the few lenders that the government is trying to offload its stake in.

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

(Reporting by Nikunj Rajesh Ohri; Editing by Saumyadeb Chakrabarty)