IDBI Bank Stake Sale Likely to Be Completed by FY26: DFS Secretary

The long-pending stake sale of the IDBI Bank is about to conclude within the current financial year (FY26), and that is what the Financial Services Secretary, M. Nagaraju, told the reporters on the margins of the Global Fintech Fest, Mumbai. (The Economic Times)

The Centre currently has a shareholding of approximately 45.48% in the IDBI Bank, whereas LIC holds approximately 49.24%. Collectively, they intend to offload 60.70% of their joint holding. (Business Standard)

Considering the size and regulatory approvals, the confidence of the government adds new energy to one of the most followed banking privatisation processes in the year. This move raises the question for traders and investors - could this reshape investor participation in India’s public banks?

What Has Enabled This Push?

• Due diligence completed: The government has finalised the due diligence process for the IDBI divestment. (The Economic Times)

• Bid invitation timeline: Financial bids are expected to be invited between October and December 2025, according to DIPAM Secretary Arunish Chawla. (Reuters)

• Regulatory clearance secured: Earlier delays were linked to the RBI’s “fit and proper” vetting of bidders. That hurdle was recently cleared. (Reuters)

• Wider divestment agenda in motion: Nagaraju mentioned that stake sales in other state-run banks via Offer-for-Sale (OFS) are also on track. (The Economic Times)

These steps suggest the machinery is in motion, but execution will depend on how quickly bidders move and how fast approvals are processed.

Who Are the Potential Bidders Eyeing the IDBI Sale?

While the government has not disclosed names officially, several global and domestic investors have expressed preliminary interest in IDBI Bank.

• Global financial players in talks: Reports suggest that Fairfax Group, CSB Bank, and a few sovereign wealth funds had earlier explored participation in the process. (Reuters)

• Private Equity funds on the lookout: PE organisations that had prior exposure to the Indian financial services are evaluating the valuation levels of IDBI after due diligence.

• Interest of domestic institutions: Indian financial entities, such as Kotak Mahindra Bank and HDFC Bank, have been keeping up with the progress of developments, but have not submitted formal bids as of yet.

• Government’s criteria: Only bidders meeting ‘fit and proper’ norms under RBI guidelines will qualify for the next round, ensuring strategic rather than speculative participation.

As investor activity intensifies in the coming quarters, the key question is, will IDBI’s legacy and branch network prove attractive enough to trigger competitive bidding?

What’s at Stake for Investors (and the Banking Sector)?

• Valuation sensitivity: The pricing of the stake sale will be closely watched; a conservative valuation could dampen investor enthusiasm, while an aggressive one may draw more bidders.

• Market confidence signal: A successful sale would send a strong signal that India is serious about reducing public dominance in banking and promoting private capital.

• Implications for public banks: The government plans to gradually reduce stakes in other PSU banks to comply with SEBI’s minimum public shareholding norms (25%). (Business Standard)

• Timing risk: Delays in regulatory clearance, valuation disagreements, or weak bidder interest could push the timeline.

If the divestment succeeds within FY26, it could become one of the landmark deals in India’s banking sector in recent years.

Conclusion

The increased optimism by the government in the sale of the IDBI Bank stake by FY26 is an indication of a clear move towards more comprehensive banking reforms in India. Due diligence has been completed, and financial bids are likely to be received shortly, so all eyes are on the process unfolding in the next several months.

With a successful divestment, the government would have a standard to follow when it comes to future privatisation and would motivate investors to have more confidence in the Indian financial sector, yet the question is, can the government execute the sale as seamlessly as it envisions?

Sources:

The Economic Times
The Economic Times
Business Standard
Reuters
Reuters