Government Wants to Sell Shares of this Public Sector Bank Before March 2026, But Why?

Centre steps up the biggest banking divestment plan of FY 2025–26 as IDBI Bank’s ownership transfer nears its final leg.

How long does it take to privatise a public sector bank in India? For the Government of India, the answer may soon be clearer. The Centre has reaffirmed its confidence that the IDBI Bank stake sale will be completed within the 2025–26 fiscal year. 

The statement was made in Mumbai by M. Nagaraju, Secretary of the Department of Financial Services, during the Global Fintech Fest held in October 2025.

The assurance marks a fresh milestone in the Government plan for IDBI Bank disinvestment, a project that has been under process for more than three years. It also shows that the government wants to speed up the sale of public sector bank shares before March 2026.

Government Plan For IDBI Bank Disinvestment 

The Centre and the Life Insurance Corporation of India (LIC) together own a 60.72 percent stake in IDBI Bank. Out of this, the government holds 45.48 percent, and LIC owns 49.24 percent. The disinvestment plan aims to sell a controlling stake to a strategic private buyer, reducing the government’s role to a minority shareholder.

In August 2025, the Securities and Exchange Board of India (SEBI) cleared the reclassification of LIC as a public shareholder, a critical step before the sale. 

The approval came with strict terms, LIC must give up its board representation, limit its voting rights to 10 percent, and reduce its shareholding to 15 percent within two years. This move clears regulatory hurdles and makes the bank more appealing to private bidders.

To understand the ownership structure before the transfer, the following table shows the current breakup.
 

The Department of Investment and Public Asset Management (DIPAM) lists the transaction under “Stage II – Under Progress.” This means that all initial procedures, such as Expression of Interest (EOI) and due diligence, have been completed. The government now expects financial bids to be invited by December 2025, setting the stage for final negotiations by early 2026.

Before moving to that phase, officials are ensuring that both regulatory compliance and financial evaluation are fully completed.

IDBI Bank Stake Sale Timeline 2025: What Lies Ahead?

The IDBI stake sale is unfolding in multiple phases, each reflecting a specific milestone under the disinvestment framework. 

A September 2025 report by the Economic Times confirmed that due diligence had been completed by shortlisted bidders. DIPAM Secretary Arunish Chawla also stated that the next step would be inviting financial bids in Q3 FY 2025–26.

The timeline of this multi-step process is summarised below.
 

This structured timeline shows the government’s intent to close the deal within the fiscal year. The Ministry of Finance expects the ownership transfer to take effect before 31 March 2026, making it one of India’s largest financial sector privatisations in recent history.

IDBI Bank Ownership Transfer Update And Market Impact

Market analysts and investors are closely tracking every development. According to a Reuters report published on 24 August 2025, IDBI Bank’s share price rose by 23 percent in 2025, driven by optimism about the stake sale. The report also mentioned that potential bidders included Fairfax Group, Kotak Mahindra Bank, Oaktree Capital, and Emirates NBD.

The excitement in the stock market reflects growing trust in the India government bank privatization news agenda. A successful IDBI transaction would be the first completed full-ownership transfer of a public sector bank to private investors.

The comparison below shows IDBI’s standing among other mid-size public banks.
 

These figures highlight that IDBI Bank remains one of the larger state-run banks poised for full privatisation. Its network and balance sheet size make it an attractive prospect for global financial investors looking to expand in India.

The ownership transfer update also includes steps to simplify share transactions for small investors. In July 2025, IDBI Bank opened a special window for physical share transfer requests to convert them into dematerialised form. This window will remain open till January 2026, aligning with SEBI’s compliance framework for demat trading.

Public Sector Bank Divestment Progress And Wider Impact

The IDBI stake sale is part of a larger movement to reduce government holdings across India’s public sector banks. 

The public sector bank divestment progress plan, reviewed by the Department of Financial Services in October 2025, includes a proposal to bring down government stakes to below 75 percent in five banks, Bank of Maharashtra, Indian Overseas Bank, UCO Bank, Central Bank of India, and Punjab & Sind Bank.

This plan aligns with SEBI’s minimum public shareholding requirement and aims to make PSU banks more market-driven.
 

A Reuters report on 7 October 2025 said that state-owned banks together plan to raise about ₹4.5 lakh crore through Qualified Institutional Placement (QIP) in FY 2025–26. The government plans to combine these stake sales with capital-raising efforts to improve financial stability.

As LoansJagat reported in “LIC Gets Boost In IDBI Bank Divestment As Bancassurance Continues Despite Stake Cut”, the IDBI Bank sale is a key step in this long-term divestment process and shows how the government is reshaping public ownership in banks. 

The success of the IDBI sale will likely set a model for future PSU divestments and guide how the government manages pricing and ownership transition in public sector banks..

Conclusion 

The coming months will determine how smoothly India’s biggest banking divestment moves forward. The government has already cleared regulatory ground and attracted serious bidders. The final step is inviting financial bids, followed by evaluation and transfer of control.

If the process stays on track, the IDBI Bank stake sale timeline 2025 will conclude before March 2026, giving the government both fiscal relief and policy credibility. Officials see this as a test of India’s readiness for broader banking reforms.

The outcome of this sale will not just mark a milestone in India’s financial history but will also show how public assets can be transitioned efficiently into private management under a structured and transparent framework.

 

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