The Indian government is moving swiftly to privatize IDBI Bank, aiming to invite financial bids for its strategic stake by December, while also advancing plans for Life Insurance Corporation (LIC) divestment.
IDBI Bank Sale: Bids Expected Soon
The government’s long-pending plan to sell its stake in IDBI Bank is finally accelerating. Arunish Chawla, Secretary of the Department of Investment and Public Asset Management (DIPAM), announced that financial bids are expected by December.
Interested buyers have already completed their due diligence and data room protocols. Formal consultations with qualified parties are also complete, paving the way for the next crucial stage of the sale.
Crucially, prospective buyers have already secured security clearance from the Ministry of Home Affairs (MHA) and passed the “fit and proper” evaluation by the Reserve Bank of India (RBI). This streamlines the final approval process once a successful bidder is chosen.
The government, along with LIC, had invited Expressions of Interest (EoIs) in October 2022 to sell a combined 60.72 percent stake in IDBI Bank. This includes 30.48 percent from the Government of India and 30.24 percent from LIC. Multiple EoIs were received in January 2023.
The final successful bidder for IDBI Bank is anticipated to be announced by March 2026, marking a significant step in the government’s disinvestment agenda.
Progress on LIC Divestment
Beyond IDBI Bank, the government is also making headway with its plans for Life Insurance Corporation (LIC). Merchant bankers and legal advisors have been appointed to facilitate a minority stake sale in LIC and other public sector financial institutions.
This appointment process, involving Request for Proposals (RFPs), has been successfully completed. These advisors will be empanelled for three years, with a possible extension, allowing individual transactions to occur within this period.
The government currently holds a substantial 96.5 percent stake in LIC. An initial public offering (IPO) in May 2022 saw the government offload 3.5 percent, raising around Rs 21,000 crore.
To comply with market regulator SEBI’s mandate, the government needs to reduce its holding further. It must sell an additional 6.5 percent stake in LIC by May 16, 2027, to meet the required 10 percent public shareholding norm.
Meeting Public Shareholding Norms
SEBI rules mandate that all listed banks and financial institutions must maintain a minimum of 25 percent public shareholding. Currently, five Public Sector Undertaking (PSU) banks have yet to meet this crucial requirement.
The government has set an August 1, 2026, deadline for these non-compliant entities to reduce government holding and achieve the necessary public float norms. This push underscores the broader strategy to enhance market compliance and attract private investment.
- Financial bids for IDBI Bank are expected by December.
- Advisors have been appointed for the minority stake sale in LIC.
- The government aims to announce IDBI Bank’s successful bidder by March 2026.
- PSU banks have until August 2026 to meet the 25% public shareholding norm.
These divestment efforts are part of a broader government strategy to streamline public sector holdings and foster greater private sector participation in the economy.
