India's IDBI Bank Privatisation Stalls Again as Government Explores Reserve Price Cut

India's privatisation of IDBI Bank — a process that began in earnest with an in-principle Cabinet approval in 2021 — has once again encountered a significant setback. After years of market consultations, regulatory clearances, and due diligence, the government invited financial bids earlier in 2026, targeting deal closure before March 31, 2026. However, the March deadline was missed because the bids submitted by prospective buyers — reportedly including Canada's Fairfax Financial Holdings and Dubai's Emirates NBD — fell below the government's undisclosed internal reserve price, resulting in a rejection of the bids.

As of late May 2026, government officials are examining whether existing tender framework law permits the acceptance of bids below the reserve price, a move that would require careful legal structuring to protect the government's fiduciary obligations and avoid potential challenges. One report indicates the government is considering a reserve price cut of as much as 20% to attract renewed bidder interest. IDBI Bank shares have rallied on these reports.

The divestment involves the government divesting its 30.48% stake and LIC selling its 30.24% stake — together representing a combined 60.7% of IDBI Bank's equity. The government and LIC together hold approximately 90-95% of the bank. Earlier market estimates valued the combined stake at around ₹72,000 crore (approximately $8.6 billion) based on prior market prices. Finance Minister Nirmala Sitharaman has publicly reaffirmed commitment to the divestment, stating in April 2026 that the process remains on track.

Any successful buyer will still require final approval from the Reserve Bank of India under its 'fit and proper' criteria, clearance from the Competition Commission of India, and will be required to make an open offer to minority shareholders. Kotak Mahindra Bank had initially been named as a potential bidder but later clarified it had not submitted a financial bid. The prolonged nature of this privatisation — approaching five years since the in-principle Cabinet approval — underscores the complexity of selling a systemically important public-sector bank in India's heavily regulated environment.