IDBI divestment: Final bid deadline set; Veerendra Heggade was former director

Mumbai/Bengaluru

The Union government has fixed February 5 as the deadline for submission of financial bids for IDBI Bank, marking a fresh step in the long-running divestment process of the lender, which earlier had Dharmasthala Dharmadhikari D Veerendra Heggade as a member/director of its board.

According to a report by Reuters, the deadline has been formally communicated to bidders who have been found eligible to participate in the process. The move indicates that the divestment of IDBI Bank has entered an advanced stage.

The Reserve Bank of India had approved Fairfax Financial Holdings, Emirates NBD and Kotak Mahindra Bank as eligible bidders in 2024. The divestment process has been underway since 2022, with the government working on regulatory clearances, bidder eligibility and transaction structure.

The government holds a 45.48 per cent stake in IDBI Bank, while state-owned Life Insurance Corporation of India (LIC) owns 49.24 per cent. Together, the government and LIC plan to sell 60.7 per cent of the bank’s equity, which would result in the transfer of management control to the successful bidder. As part of the proposed transaction, the winning bidder will be allowed to rename the bank, according to sources familiar with the process.

Why LIC and the government want out

IDBI was bailed out by LIC in 2019 after bad loans nearly sank it.
Since then:

• Balance sheet cleanup happened
• NPAs reduced
• The bank became sale-ready

Now LIC wants to exit a non-core, forced investment, and the government wants to reduce its banking footprint.

The Centre has earlier stated that it intends to complete the IDBI stake sale by March 2026.

During its earlier phase as a public-sector financial institution, IDBI Bank’s board included individuals from diverse backgrounds. Veerendra Heggade served as a director on the board from 2005 to 2008, during the period when IDBI was transitioning from a development finance institution to a commercial bank.

IDBI Bank was rescued in 2019 when LIC infused capital into the lender following a surge in non-performing assets. The capital infusion resulted in LIC becoming the majority shareholder in the bank. Since then, IDBI has undertaken balance-sheet clean-up and operational measures as part of efforts to prepare the lender for disinvestment.