LIC to continue as Public Shareholder during Privatization of IDBI Bank: SEBI Gives Nod Subject to Restrictions

The Securities and Exchange Board of India (SEBI) has approved the reclassification of Life Insurance Corporation of India (LIC) as a public shareholder in IDBI Bank, paving the way for the government’s strategic disinvestment of the lender.

The securities regulator’s nod comes, albeit to strict restrictions that reshape LIC’s role from a controlling promoter to that of a financial investor.

As of June 2025, LIC holds a 49.24 percent stake in IDBI Bank, while the government holds 45.48 percent. Together, they control 60.7 percent of the lender’s equity. LIC first acquired a 51 percent stake in January 2019 for about ₹21,624 crore to recapitalize the struggling bank, taking over management control and board representation at the time. Since then, LIC’s holding has fallen below 50 percent but the insurer continued to enjoy promoter status.

SEBI’s approval now strips LIC of those promoter rights; the regulator has capped LIC’s voting rights at 10 percent, irrespective of its shareholding level. LIC will not be allowed to exercise direct or indirect control over IDBI Bank, hold any special rights, appoint board representatives or occupy key managerial positions. Additionally, LIC is required to reduce its stake to 15 percent or below within two years of the closure of the deal, in line with guidelines issued by the Reserve Bank of India.

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The Department of Investment and Public Asset Management (DIPAM) conveyed SEBI’s decision to LIC as part of preparations for IDBI’s ongoing privatization process. The Cabinet Committee on Economic Affairs had approved IDBI Bank’s strategic sale in 2021, and since then requisite due diligence was completed and financial bids from interested buyers are expected to arrive between October and December 2025.

Emirates NBD and Canadian billionaire Prem Watsa have been identified as potential suitors, interested in acquiring stakes in IDBI.

LIC Chairman R. Doraiswamy recently noted that while LIC and the government will jointly offload a significant portion of their stakes during privatization, the insurer intends to retain a residual holding in IDBI Bank to maintain a long-term business relationship. He further emphasized that the original acquisition was driven by the bank’s recapitalization needs, which provided LIC an opportunity to expand distribution through IDBI’s branch network.

With SEBI’s reclassification in place, the path has been cleared for one of the largest bank privatizations in India’s financial sector. In the meanwhile, IDBI Bank shares have been actively traded, gaining nearly 24 percent this year.

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