Finance Ministry Clarifies IDBI Bank Restructuring Process

The Ministry of Finance issued a clarification on 29 October 2026 about how the strategic restructuring of IDBI Bank Ltd has been carried out. The note explains who took the decisions after the first round of bids was not accepted, how the bank was valued and why a second round of offers was invited.

The first bid round

The initial bid round was run in the financial year 2025-26 by the Department of Investment and Public Asset Management (DIPAM) under its internal practices. The ministry stresses that these practices are indicative guidelines rather than binding rules, and that the foreword to them says the procedure is not to be read as a rigid legal framework and may need adaptation so that a complex transaction is completed in time. A press note of 14 October 2026 had already explained that there is no benchmark fixed in advance for bidding: bidders arrive at their own valuation and submit bids confidentially, while independent agencies value the enterprise at the same time, and that valuation is used only as a comparator to judge whether the bids are reasonable. The bid price and the comparative valuation may therefore sit above or below each other.

Who decided what came next

The request for proposal had already provided for this situation. Paragraph 5.3.6(iii) states that if the financial bid of the highest bidder falls below the reserve price, the Government will decide the further course of action and the qualified parties cannot later question that decision. DIPAM has no internal procedure for such a case, so the matter rested with the Core Group of Secretaries on Disinvestment (CGD). In its meeting of 16 August 2017 the Cabinet Committee on Economic Affairs approved a note on the procedure and mechanism for strategic disinvestment and empowered the CGD to take policy decisions on procedural issues and to allow deviations where needed. Using those powers the CGD itself settled the procedure for the second, or best offer, round. The reserve price was neither lowered nor raised, and the first round became functus officio once the initial bids were not approved.

How the bank was valued

The CGD reviewed the whole valuation method in April 2026 before best offer bids were invited. Because the comparator has to belong to the same period as the bids, and the accounts closing on 31 March 2026 reached the public domain only at the end of April, the independent valuers began work on revised valuations in May 2026. The process stayed double blind: the bidder did not see the valuation and the valuers did not see the bids, and only the CGD saw both. Two advisers worked independently using distinct methods. The business valuation went through the transaction adviser, who brought in experts trained in the Market Multiple Method. Since no suitable comparable transactions were available, the comparable companies method was used, the comparable set being all the listed public sector banks.

Why public sector banks were the comparison

IDBI was a government owned banking company until 2019 and became a government controlled one after LIC took majority stakes that year. With no specific regulatory protocol for that position, the Reserve Bank began treating it as a private bank for regulatory purposes alone, even though ownership stayed overwhelmingly with LIC and the Government, and market investors went on valuing it as a public sector entity.

The tax indemnity

The asset valuer added value for disputed tax demands, which were indemnified because the qualified bidders asked for it in common, the aim being to push the offer upwards. The ministry calls this a low probability and revenue neutral event, since only an additional tax demand actually paid would be reimbursed. The possible liability on that count was Rs 627 crore, while the bid discovered price rose by Rs 3,917 crore. The Government and LIC keep residual shareholdings so that they share in the gains expected from the restructuring.