Some institutions age gracefully. IDBI didn’t. Built for one job, forced into another, it nearly broke doing it and had to be pulled back by an insurer that wasn’t even in banking. Over six decades on, it’s still unclear who it belongs to — the government, LIC, or soon, perhaps, a Canadian investment firm.IDBI wasn’t born a bank. Parliament created it on July 1, 1964, as a wholly-owned RBI subsidiary, with the bill passed almost recklessly fast — introduced and cleared in the Lok Sabha the same day, through the Rajya Sabha within a week, and given presidential assent within a month. The RBI Governor called it “the reserve or apex bank of industry.” Its job: pump long-term credit into India’s industrial base.It quickly became the largest source of institutional credit for big industrial projects — fertilizer plants, cement units, petrochemical complexes — in short the ‘commanding heights’. This was wholesale, government-directed lending, not retail banking, and IDBI did it for nearly 40 years.Turning into an actual bankThat model collapsed after 1990s liberalisation. Development finance institutions everywhere hit the same wall — no cheap funds, heavy market borrowing, rising competition. IDBI’s answer was to become a commercial bank itself. In 2004, Parliament corporatised it into IDBI Ltd, folding its decade-old banking arm back into the parent.But nobody fixed the balance sheet to match. IDBI Bank inherited a loan book built for industrial financing — chunky, long-gestation, single-borrower loans — without the diversified retail deposit base that normally justifies such risk. It had a bank’s liabilities and a project financier’s assets, a mismatch that sat quietly for years before it blew up.The losses arriveIt blew up in the mid-2010s. A nationwide corporate bad-loan crisis hit public-sector banks hard, and IDBI Bank took it worse than almost anyone. By May 2017, RBI placed it under Prompt Corrective Action, restricting fresh lending and expansion. The numbers were brutal: a net loss of roughly ₹8,238 crore in FY2018, gross NPAs near 28-30 per cent of advances, thin Tier-I capital, and three straight years of negative returns. This was a bank on stretcher.Before LIC entered, the Centre had already infused roughly ₹10,600 crore in FY 2017-18, on top of about ₹2,200 crore between FY15 and FY17. It helped, but losses kept outrunning the infusions — and continuing to bankroll it clashed with a government trying to shrink its commercial footprint, not expand it.Enter LICThe rescue came, oddly, from the Life Insurance Corporation, which already held a modest stake. In January 2019, after IRDAI’s approval, LIC acquired a 51 per cent stake, becoming majority owner. RBI promptly reclassified IDBI Bank as private-sector — a paradox, since its controlling shareholder was a state-owned insurer.LIC committed real capital (estimates range from ₹13,000 crore to over ₹21,000 crore across phases) and agreed to eventually cut its holding to around 15 per cent within five to seven years, per insurance-sector caps. Its ownership was always meant as a bridge.The effect was immediate: capital adequacy jumped from 8.14 per cent to 11.58 per cent by March 2019. LIC also gained rights to nominate the Chairman, MD and CEO, and Deputy MDs — real influence, even as regulators insisted this wasn’t a conventional takeover.There was business logic too: IDBI’s 1,800-plus branches gave LIC a bancassurance channel, while LIC’s agent network and capital gave IDBI what it lacked. The plan: shift lending from concentrated corporate exposure towards retail, MSME and agriculture.Larger disinvestment storyIndian disinvestment runs on two tracks — strategic disinvestment (selling government stake plus control) and minority stake sales (IPOs, buybacks, no control transfer). The 2021 New Public Sector Enterprise Policy sharpened this: four strategic sectors, including financial services, would retain minimal government presence; everything else would be privatised, merged, or closed. By 2022, PSU boards were even empowered to recommend their own subsidiaries’ divestment.IDBI Bank sits squarely at this intersection — nominally private, majority-owned by a public insurer, and an institution the government has long wanted to exit.The sale that won’t closeThe hunt for a buyer of the roughly 60-61 per cent combined government-LIC stake began with 2022-23 expressions of interest, followed by a long search for a “fit and proper” promoter. Names in the frame included Fairfax Financial Holdings, Emirates NBD, and (reportedly without a formal bid) Kotak Mahindra Bank. Formal bids arrived around February 2026, with Fairfax as apparent frontrunner.Ironically, while talks dragged, IDBI Bank got dramatically healthier. Gross NPAs fell from near 20 per cent in mid-2022 to around 2.5-3 per cent by 2025; net NPAs dropped to a sliver of a per cent; capital adequacy topped 25 per cent; profits kept growing. The bank became more valuable while the deal stalled — which only pushed up the government’s price expectations, making closure harder.Cold feet, cold marketsThe government wanted the roughly ₹66,000 crore deal done by end-March 2026. It missed that deadline — bids reportedly came in below reserve price, with weak sentiment and geopolitical risk cited as reasons to pause. Rumours of cancellation in mid-March 2026 hit the stock hard before being denied; DIPAM confirmed the process continues. Reports suggest the government is resetting pricing to relaunch, with the Finance Minister reaffirming privatisation remains the plan. Employee unions continue pushing back, adding friction.So, who owns IDBI Bank?Officially: the government and LIC, roughly as they have since 2019. Practically: an institution in limbo — private in classification, public in instinct — waiting for a buyer willing to meet a price nobody’s agreed to yet. The bank itself is no longer the problem; its books are cleaner than in a decade. What remains is timing, valuation, and political will.Rath is a former central banker, and Sharma is an independent researcher. Views are personalPublished on July 17, 2026