The government's disinvestment process for IDBI Bank has reached a critical milestone with the inter-ministerial group clearing all decks for the bidding process. Sources indicate that financial bids for the stake sale are likely to be invited within a week, marking significant progress in one of the major banking sector privatizations.

Timeline and Process Updates

The Centre is expected to upload the invitation for financial bids on the Department of Investment and Public Asset Management (DIPAM) website shortly. The final draft of the share purchase agreement has received approval, streamlining the path forward for potential bidders.

Ownership Structure

The Centre and Life Insurance Corporation of India will jointly divest their combined 60.70% stake in the lender. Current ownership data reveals the government's significant control over the bank.

Market Dynamics and Potential Bidders

IDBI Bank's market capitalization of over ₹1 lakh crore presents challenges for investors seeking to acquire the 60% stake. Sources suggest Kotak Mahindra Bank emerges as the frontrunner, potentially structuring a part-cash and part-equity merger deal leveraging its equity currency advantage.

The disinvestment landscape has evolved since the process began. While Emirates NBD and Fairfax were initially primary suitors and conducted due diligence, Emirates NBD subsequently announced a $3 billion investment to acquire majority stake in RBL Bank.

Strategic Significance

The IDBI Bank disinvestment, first announced in 2022, gained momentum this year as part of the government's broader privatization agenda. The transaction represents a key component in reducing government stake in public sector enterprises while aiming to improve operational efficiency and unlock stakeholder value.

India's small business credit market reached ₹46 lakh crore with 16.2% year-on-year growth, driven by a significant increase in first-time borrowers and expanding NBFC participation across segments, according to the latest CRIF–SIDBI Small Business Spotlight Report.

Growing Participation from New Borrowers

The report highlights a notable trend towards market formalization, with 23.3% of small business borrowers being new to credit and 12% borrowing for an enterprise for the first time. This influx of new participants has contributed to substantial growth in active loan accounts, which rose 11.8% to reach 7.30 crore.

Market Structure and Segment Performance

Sole proprietors continue to anchor the small business credit ecosystem, accounting for nearly 80% of total credit exposure and close to 90% of all borrowers. The fastest growth is emerging among sole proprietors with a formal enterprise footprint, where credit exposure expanded 20% year-on-year.

NBFCs have significantly strengthened their role among sole proprietors, now accounting for over 41% of lending in this segment, reflecting their expanding reach into smaller and under-penetrated markets.

Credit Structure and Product Mix

Working capital loans constitute nearly 57% of enterprise credit outstanding, highlighting ongoing liquidity requirements for formal businesses. Among sole proprietors, loans against property dominate the portfolio, followed by business loans and commercial vehicle financing.

Unsecured lending experienced particularly sharp growth of 31% year-on-year, even as lenders maintained overall portfolio discipline and risk management practices.

Geographic Expansion and Asset Quality

Credit distribution continues to expand beyond major urban centers, with Maharashtra, Tamil Nadu, Uttar Pradesh, and Gujarat leading in overall portfolio size. Faster growth rates are emerging in states such as Telangana, Andhra Pradesh, and West Bengal.

Asset quality trends support the positive growth trajectory. Loans overdue by 91 to 180 days declined to approximately 1.40%, down from 1.70% two years earlier. The share of very low-risk and low-risk borrowers increased across both enterprises and sole proprietors.

Odisha exemplifies this balanced growth approach, with small business credit expanding 17.2% year-on-year to ₹96,000 crore, exceeding the national average. Credit growth in the state's aspirational districts crossed 22% while coinciding with improving delinquency trends, demonstrating successful credit expansion into newer regions without materially weakening overall risk profiles.