Inter-ministerial group to meet today, to discuss IDBI Bank's strategic sale

New Delhi, July 7, 2025 — The long-awaited strategic disinvestment of IDBI Bank is expected to make headway as an inter-ministerial group (IMG) convenes today to deliberate key aspects of the sale process, including bidder eligibility, timeline finalization, and regulatory clearances. The meeting, chaired by top officials from the Department of Investment and Public Asset Management (DIPAM), marks a crucial step toward concluding one of India’s most ambitious privatisation efforts.

The government and LIC together hold over 94% in IDBI Bank, and have offered to divest a combined 60.72% stake to a strategic buyer. Of this, the central government holds 45.48% and LIC owns 49.24%. In the proposed transaction, the government plans to offload 30.48% and LIC 30.24%, reducing their stakes significantly and transferring management control.

Agenda of the Meeting

According to people familiar with the development, the IMG—comprising representatives from DIPAM, NITI Aayog, the Ministry of Finance, and the Reserve Bank of India (RBI)—will evaluate technical scrutiny of bids received, finalize the due diligence roadmap, and discuss necessary amendments to address regulatory concerns.

“The IMG is likely to focus on shortlisting qualified bidders and ironing out concerns raised during the EoI (Expression of Interest) stage,” a senior official told Business Standard. “They will also evaluate feedback from the RBI, given the strategic nature of the bank and its exposure to sensitive sectors.”

Notably, the Reserve Bank’s stance will be critical as it is tasked with approving 'fit and proper' criteria for new promoters in banking. Industry watchers expect the central bank to seek additional safeguards, especially considering that the strategic investor will gain significant control.

Current Status of Bidding Process

The government had received multiple EoIs from domestic and international bidders after issuing the invitation in October 2022. However, the process encountered delays due to complexities around regulatory compliance, management control transition, and investor queries regarding non-performing assets and legacy issues.

As per recent updates, a handful of bidders remain active, including foreign financial institutions and Indian business houses. Due diligence has been partially completed by these interested parties.

“We are awaiting the next stage of clarification from DIPAM,” said a representative of one of the global funds involved. “The opportunity is attractive given the growth of India's retail and MSME banking landscape, but clarity on governance, liabilities, and digital infrastructure is vital.”

Analysts Weigh In

Market analysts say the sale of IDBI Bank, once completed, will be a key milestone in India's banking reform agenda.

“IDBI Bank’s strategic sale will test the government’s ability to balance financial sector reforms with the complexities of a large-scale divestment,” said Siddharth Tiwari, senior banking analyst at ICICI Securities. “The fact that the government and LIC are jointly exiting management control sends a strong signal of intent.”

He added that with improving macroeconomic fundamentals, a restructured IDBI Bank offers significant upside for investors willing to play a medium-to-long term consolidation story.

Market Response and Investor Sentiment

Shares of IDBI Bank were trading flat ahead of the meeting, reflecting investor caution amid uncertainty over the sale’s timeline. However, the stock has delivered nearly 20% returns over the last 12 months, outperforming several peers, buoyed by improved asset quality and profitability.

In FY24, IDBI Bank reported a net profit of ₹4,063 crore, up 37% year-on-year, aided by lower NPAs and better operational efficiency. The gross NPA ratio improved to 4.28% while the net NPA fell below 1%. The capital adequacy ratio stood at 16.33%, well above the regulatory requirement.

“IDBI Bank is not the same stressed lender of five years ago,” said Aarti Shah, fund manager at a Mumbai-based asset management firm. “If the government provides clear post-sale regulatory assurance, the valuation rerating could be substantial.”

Government’s Broader Disinvestment Agenda

The disinvestment of IDBI Bank is part of the Modi government’s broader strategy to monetise non-core assets and reduce the fiscal deficit. The Union Budget for FY26 has set a disinvestment target of ₹50,000 crore, with the IDBI stake sale forming a substantial portion of the expected proceeds.

While previous attempts to privatize public sector undertakings (PSUs) like BPCL and Air India saw mixed outcomes, the relatively advanced stage of IDBI Bank’s sale has raised hopes in policymaking circles.

A successful transaction would also set a precedent for the proposed privatisation of other public sector banks, as suggested by the NITI Aayog.

Investor Outlook

Market participants will be closely watching the outcome of today’s meeting for clues on next steps. Any concrete announcement—especially around shortlisting of bidders or timeline for the final share purchase agreement—could act as a trigger for re-rating IDBI Bank shares.

For long-term investors, analysts recommend keeping an eye on developments and waiting for more clarity before taking aggressive positions.

“If you're a retail investor looking at IDBI Bank, understand that while the upside is real, it hinges on successful execution,” said Ramesh Iyer, head of equity strategy at Motilal Oswal. “Look at it as a multi-year play, not a quick gain.”

As the inter-ministerial group meets to discuss the strategic sale of IDBI Bank, all eyes are on whether the government can finally push the deal across the finish line. With macro tailwinds, regulatory support, and improved bank performance, the stage seems set. Yet, execution will be key to transforming this landmark sale into a success story for Indian banking reform.