Government Eyes OFS Route to Boost IDBI Bank Public Shareholding

The government is considering selling a stake in IDBI Bank through the Offer-for-Sale (OFS) route to increase public shareholding, following an unsuccessful attempt to divest its stake in the LIC-controlled lender as per news reports.

At present, the public shareholding in IDBI Bank stands at just 5.29%, which limits the scope for fair market valuation. The remaining stake is largely held by Life Insurance Corporation of India (LIC), which owns 49.24%, while the Government of India holds 45.48%.

Earlier this month, the proposed sale of a 60.72% majority stake, jointly held by the government and LIC, was scrapped after financial bids from two potential buyers reportedly fell short of the reserve price. Under the plan, the government and LIC were to offload 30.48% and 30.24% stakes, respectively.

OFSSeen as a Step Toward Better Valuation

Increasing public shareholding by 10–15% through OFS could improve liquidity and enable more reliable market valuation. 

A higher public float would also make the price discovery process more transparent and could serve as a benchmark for any future strategic sale. The government may still pursue privatisation after completing one or two OFS tranches.

This marks the second major attempt by the government to privatise IDBI Bank, with the first initiative dating back to 2016. The plan was initially announced in the Union Budget speech by then Finance Minister Arun Jaitley. However, the attempt failed due to valuation concerns.

LIC Takeover and Bank’s Transformation

Subsequently, LIC acquired a controlling stake in IDBI Bank as part of a rescue plan. In January 2019, LIC purchased a 51% stake for around ₹21,624 crore to address the bank’s mounting bad loans.

Following this, the Reserve Bank of India classified IDBI Bank as a private-sector lender. In December 2020, the bank was reclassified as an associate company after LIC reduced its stake to 49.24%.

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Disinvestment Process Gains Momentum

The privatisation process gathered pace in May 2021, when the Cabinet Committee on Economic Affairs granted in-principle approval for strategic disinvestment along with transfer of management control.

In October 2022, KPMG India was appointed as the transaction advisor, and the plan to sell a 60.72% stake was formally announced.

The Department of Investment and Public Asset Management (DIPAM) invited Expressions of Interest the same month, while the Securities and Exchange Board of India approved the reclassification of the government as a public shareholder upon completion of the sale in January 2023.

Recent Developments and Bidders

In August 2025, SEBI also approved the reclassification of LIC as a public shareholder upon completion of the sale. After a prolonged due diligence process, financial bids were finally received in February 2026 from Emirates NBD Bank and Fairfax India, though these ultimately fell short of expectations.

Overall, the proposed OFS route is now being seen as a pragmatic step to improve valuation transparency and revive the broader privatisation roadmap for IDBI Bank.

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