The Finance Ministry on Thursday defended the process adopted for the strategic disinvestment of IDBI Bank, clarifying that the government neither reduced nor increased the reserve price after the initial bids failed to meet the threshold.
In a clarification the ministry said the Core Group of Secretaries on Disinvestment (CGD), empowered by the Cabinet Committee on Economic Affairs (CCEA), decided the procedure for the second round of bidding, also referred to as the best offer round.
The initial bidding round was conducted by the Department of Investment and Public Asset Management (DIPAM) in FY26. The ministry said the indicative guidelines governing strategic disinvestment are not rigid and allow flexibility to ensure transactions are completed effectively and within a reasonable timeframe.
The government said there is no predetermined benchmark for bidding. Bidders independently assess the value of an enterprise and submit confidential offers, while independent agencies undertake contemporaneous valuations to assess whether the bids are reasonable.
The request for proposal (RFP) for the IDBI Bank transaction explicitly provides that if the highest financial bid is below the reserve price, the government will decide the further course of action. The qualified interested parties cannot subsequently question the government’s decision in this regard, the ministry said.
It added that the CCEA, in August 2017, had delegated powers to the CGD to address procedural difficulties and consider deviations necessary for the effective implementation of approved strategic disinvestment transactions.
The valuation methodology for IDBI Bank was reviewed by the CGD in April 2026, ahead of the invitation for best offer bids. Independent valuation agencies began work on revised valuations in May, after the bank’s financial accounts for the year ended March 31, 2026, became publicly available in late April.
The ministry said the process remained “double blind”, with bidders unaware of the valuation and valuers not having access to the bids. The CGD alone had access to both sets of information to assess the reasonableness of the offers.
Two independent advisers carried out the valuation using distinct methodologies. For the business valuation, the comparable companies method was adopted, using listed public sector banks as benchmarks, as suitable comparable transactions were not available.
The ministry noted that IDBI Bank, which was government-owned until 2019, became government-controlled after LIC acquired a majority stake that year. While the Reserve Bank of India began treating the bank as a private bank for regulatory purposes, investors continued to value it as a public sector entity, given the government’s and LIC’s substantial shareholdings.
The asset valuation also factored in disputed tax demands, which were indemnified at the request of all qualified bidders to support higher offers. The government said the potential liability on this account was ₹627 crore, while the discovered bid price increased by ₹3,917 crore, enhancing the value of the transaction for the Centre and LIC.
The ministry described the potential tax liability as a low-probability event and said the arrangement would be revenue-neutral for the government, as reimbursement would be limited to additional tax demands actually paid, if any.
It also said the rationale for discarding IDBI Bank’s volatile stock price as a valuation benchmark had been explained in its October 14 press note.
The Centre and LIC will retain residual shareholdings in the bank, allowing them to benefit from any future increase in value following its strategic restructuring, the ministry added.