IDBI Bank strategic sale likely to conclude by October: Govt sources

The sale involves the government and LIC offloading a 60.72 percent stake in IDBI Bank.

The government is targeting October for the conclusion of the long-pending strategic disinvestment of IDBI Bank, two senior government sources confirmed, signalling that the financial bids will be invited soon as the final phase of the sale process.

"IDBI Bank stake sale will be concluded and finalised by October," a senior government source said. The assurance comes as the Inter-Ministerial Group (IMG) on disinvestment met on July 9 to discuss the draft Share Purchase Agreement, a crucial milestone before final approvals are sought from higher authorities.

A Share Purchase Agreement (SPA) is a legal contract that outlines the terms and conditions of a transaction in which shares are being sold. For strategic disinvestment, it includes clauses covering regulatory approvals, management transition, indemnities, and bidder obligations post-acquisition.

The meeting of the IMG has paved way for clearance of the SPA by the Core Group of Secretaries on Disinvestment (CGD) and the ministerial panel headed by the Union Finance Minister.

"The SPA is the critical step. Once it is finalised and cleared, the government can move toward financial bids and deal closure," another senior government source familiar with the process said.

"If there are no hiccups, IDBI Bank sale will happen. After the financial bids, once the bidder is chosen, the SPA will be signed. On the same day, the shares of the government will go to the bidder and the funds will come to the government. It will all happen on the same day," the source told Moneycontrol.

The strategic sale involves the government and Life Insurance Corporation (LIC) jointly offloading a 60.72 percent stake in IDBI Bank. IDBI Bank was re-categorised as a 'Private Sector Bank' by the RBI in January 2019, following LIC acquiring a stake in it. However, the government and LIC still collectively hold a significant majority stake. The Centre currently holds 30.48 percent, while LIC owns 49.24 percent.

The IDBI Bank stake sale has been a key component of the Centre’s privatisation agenda. The process has seen delays due to compliance, regulatory vetting, and evolving market conditions, but is now nearing the finish line.

If concluded by October, the IDBI Bank sale would be the first major bank privatisation, setting a precedent for future stake sales in public sector banks. The sale is being seen as a test case for the government’s broader ambitions to reduce its footprint in the banking sector.