The Centre is selling its stake in IDBI Bank after a major turnaround. Gross bad loans fell from 31.78 per cent in September 2018 to 2.32 per cent in March 2026. The government infused ₹25,000 crore to clean the balance sheet. Officials said customers will see little change after the sale.
The Centre’s decision to sell a controlling stake in IDBI Bank rests on a turnaround that required retrieving it from the RBI’s Prompt Corrective Action Framework with NPAs running to 31.78 per cent to a point where its balance sheet was clean enough to sell.
While official committees had been recommending such a move for a quarter century, the government had been infusing capital in the Bank since 2018 when its gross non-performing assets had climbed to nearly a third of its advances and capital adequacy ratio had fallen to 6.22 per cent.
This stage was reached following a series of bad loans during the 2006-08 lending boom, which went to well-connected promoters with a history of default.
A government factsheet points to ₹8,60.92 crore sanctioned to Kingfisher Airlines in 2009, of which ₹8,07.82 crore is unrecovered; exposure of about ₹3,639 crore to ABG Shipyard, which turned NPA in November 2013; about ₹1,14.79 crore of defaults on Winsome Diamonds; and claims of about ₹9,903 crore in Videocon’s insolvency. In 2006, the distressed United Western Bank was merged into IDBI under an RBI-led resolution.
It took years of cleansing the balance sheets and an inusion of of about ₹25,000 crore of capital the Centre put in between 2010 and 2020 for the Bank to be viable for a strategic sale.
Its gross non-performing assets fell from 31.78 per cent in September 2018 to 2.32 per cent in March 2026. Net NPAs dropped from 17.30 per cent to 0.15 per cent, and the capital adequacy ratio rose from 6.22 per cent to 26.65 per cent.
After years under the RBI’s Prompt Corrective Action framework, the bank posted a record net profit of ₹9,513 crore in FY26. Total business crossed ₹6,27,149 crore as of September 30, 2026, up 18 per cent in a year.
Officials saud customers will see little change. The RBI will continue full regulatory and prudential supervision, deposits remain insured up to ₹5 lakh under DICGC, and the 40 per cent priority sector lending target applies as it does to all private banks.
IDBI will keep running Jan Dhan, PMJJBY, PMSBY and Atal Pension Yojana, and will continue to support small businesses through Mudra loans and GeM Sahay, which offers collateral-free digital working capital based on Government e-Marketplace records.
The government expects the sale to bring in foreign banking expertise, including from G7 countries, along with investment, competition and jobs. Other public sector banks stay with the government, which says they posted a record aggregate net profit of ₹1.98 lakh crore in FY26, with gross NPAs at 1.93 per cent.
The argument for strategic sale is not new. Government officials said the deicision for strategic sale is on advice given long ago.
The Narasimham Committee recommended in 1998 that the government’s holding in nationalised banks be cut to 33 per cent.
The Raghuram Rajan Committee, set up by the Planning Commission, reported in 2008 that its majority saw no compelling reason for continued government ownership and favoured selling small underperforming public sector banks to strategic investors.
A government-RBI committee on financial sector assessment suggested in 2009 that the holding fall below 51 per cent.
The government says the UPA wound up the Ministry of Disinvestment in May 2004 and acted on none of this. Montek Singh Ahluwalia said in 2021 that the UPA “failed to take on the full challenge of banking reform”.