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

India's privatisation of IDBI Bank — a process that began with in-principle Cabinet approval in 2021 — continues to face significant obstacles. After years of consultations, regulatory clearances, and due diligence, the government invited financial bids earlier in 2026 targeting deal closure before March 31, 2026. However, the 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, leading to a rejection of the bids.

Government officials are now examining whether the existing tender framework permits acceptance of bids below the reserve price, a move that would require careful legal structuring to protect the government's fiduciary obligations. Reports indicate the government is considering a reserve price cut of as much as 20% to attract renewed bidder interest, and IDBI Bank shares have rallied on these developments.

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 (roughly $8.6 billion) based on prior market prices. Finance Minister Nirmala Sitharaman has publicly reaffirmed the government's 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. To facilitate the transaction, the Centre and LIC have sought approvals to relinquish their promoter status, and SEBI has been approached to exempt IDBI Bank from minimum public shareholding norms. 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. The outcome is closely watched as a bellwether for India's broader banking sector reform agenda.