Government Leans on Dividends as IDBI Bank Sale Becomes Key to FY26 Capital Receipts

The government is increasingly relying on dividend income from public sector enterprises to make up for weak disinvestment receipts, even as it places strong expectations on the strategic sale of IDBI Bank to support capital receipts in the next financial year.

Dividend Income Dominates Capital Receipts

Latest data from the Department of Investment and Public Asset Management (DIPAM) shows that total receipts so far this year have reached ₹58,328 crore. A large share of this, ₹49,560 crore, has come from dividends paid by public sector companies. In contrast, disinvestment receipts have remained modest at ₹8,768 crore.

This growing dependence on dividends reflects slower progress on asset sales during the year. While dividend income has provided stability to government finances, it is seen as a recurring source rather than a one-time capital boost, which limits its ability to fund long-term expenditure needs.

IDBI Bank Disinvestment Gains Importance

Against this backdrop, the proposed strategic disinvestment of IDBI Bank has become critical for the Union Budget calculations for FY26. The transaction is expected to contribute significantly to capital receipts under the category of “Miscellaneous Capital Receipts”, which now includes proceeds from the management of equity investments and public assets.

The government plans to sell 30.48% of its 45.48% stake in IDBI Bank. Based on current market valuations, total proceeds from the sale could be around ₹63,000 crore, with the government’s share estimated at over ₹31,700 crore.

Progress and Delays in the Sale Process

The IDBI Bank sale process has faced delays compared to earlier timelines. Regulatory approvals are largely in place, and the Share Purchase Agreement received clearance from the Inter-Ministerial Group in June. It was later approved by the core group of secretaries after multiple rounds of review.

However, financial bids, which were initially expected in November, have not yet been invited. The delay is partly linked to clarifications sought by the shortlisted bidders on the draft agreement. While efforts are ongoing to move the process forward, there is still uncertainty over whether the transaction will be completed before the end of March.

Shift Away from Fixed Disinvestment Targets

In recent years, the government has moved away from setting strict numerical targets for disinvestment. This change signals a more flexible approach, focusing on timing, valuation, and due diligence rather than meeting preset benchmarks.

Conclusion

With disinvestment receipts lagging, dividend income has emerged as a key support for government finances in the current year. However, the strategic sale of IDBI Bank remains central to capital receipt plans for FY26. The success and timing of this transaction could play a major role in shaping the government’s fiscal position in the coming financial year. 

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