The Indian government has revived the exercise to sell its stake in IDBI Bank and is looking to speed up the process, months after rejecting bids that fell below the reserve price, according to Business Today.
Government Action and Bidders
Two high-powered meetings of officials took place on Monday, with focus on two qualified bidders – Prem Vatsa's Fairfax and Emirates NDB, government officials said. The details are being worked out and more details will be available in the coming weeks. Kotak Bank, which was seen as the sole domestic candidate, said in February that it neither participated in the bidding process nor submitted any financial offer.
The Centre and LIC together hold a 94.7% stake in the bank and are looking to sell 60.7%, with an Expression of Interest (EoI) first sought in October 2022.
Market Reaction
Amid reports that Fairfax submitted a fresh bid, IDBI Bank shares jumped 5% intraday before closing nearly 3% higher at Rs 86.5 on BSE. The stock had hit a 52-week high of Rs 116.9 on March 2 before falling to a low of Rs 67.7 after a panel of secretaries rejected the earlier bids. In recent months, Dipam (Department of Investment and Public Asset Management) has stepped up disinvestment, but the exercise has so far focused on sale of small stakes in state-run banks and companies through the stock market route.
Broader Foreign Investment Trend
While it is still early days, a successful sale of IDBI Bank shares would add to a series of stake purchases by foreign institutions in India's financial sector. Several large cross-border deals have closed recently:
| Deal | Buyer | Target | Stake | Value | Date Announced/Completed |
|---|---|---|---|---|---|
| Yes Bank stake | Sumitomo Mitsui Banking Corporation (SMBC) | Yes Bank | 20% | ~$1.6 billion (Rs 13,483 crore) | May 2025; RBI approval Aug 2025; SMBC raised holding to 24.2% by Sept 2025 |
| RBL Bank majority | Emirates NDB | RBL Bank | 60% | ~$2.8 billion | June 2026 (completed; largest FDI in Indian banking) |
| Shriram Finance stake | Mitsubishi UFJ Financial Group (MUFG) | Shriram Finance | 20% | $4.4 billion | December 2025 (largest cross-border investment in India's financial sector at the time) |
These transactions underscore a strong appetite among foreign financial institutions for exposure to India's growing banking and finance sector. In the Yes Bank deal, SMBC started with a 20% purchase from SBI and a consortium of banks. After RBI approval in August 2025 for up to 24.99% as a non-promoter, SMBC increased its holding to 24.2% by September 2025 through additional open market purchases, becoming Yes Bank's largest shareholder while SBI's stake fell to just over 10%. Emirates NDB's acquisition of 60% in RBL Bank in June 2026 included a primary capital infusion and an open offer, marking the first majority foreign takeover of a profitable private sector bank in India.
Implications for Trade Finance and Capital Flows
For treasury professionals and CFOs tracking capital flows into emerging markets, the IDBI stake sale and recent foreign investments signal sustained confidence in India's financial sector. A successful sale would bring in additional foreign capital and expertise, potentially lowering the cost of capital for trade finance products such as letters of credit and supply chain financing offered by the bank. The presence of bidders like Emirates NDB – already established in India after the RBL Bank acquisition – suggests that Gulf-based institutions are expanding their footprint, which could enhance trade corridors between India and the Middle East. The pick-up in disinvestment via the stock market route also provides liquidity and price discovery, benefiting portfolio investors monitoring state-owned banks.
Key takeaway: The government's renewed push to divest IDBI Bank aligns with a broader wave of foreign institutional investment in Indian banking, with implications for trade finance costs and cross-border capital flows.
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