The Cabinet Committee on Economic Affairs approved the strategic divestment of IDBI Bank, under which the Government of India and Life Insurance Corporation together plan to sell over 60% of their combined stake to a private strategic buyer. Post-divestment, IDBI Bank will cease to be a government-controlled entity. RBI's fit-and-proper criteria must be cleared by the prospective buyer before any ownership transfer is finalised.

IDBI Bank occupies a unique position in India's banking landscape: it is simultaneously held by the Government of India and LIC, making it a public-sector bank under RBI's classification. The proposed divestment would transfer management control to a private entity — a first of its kind for a bank of this scale under India's post-1991 reform architecture.

For RBI, the transaction is consequential because RBI regulates ownership changes in banks under Section 12B of the Banking Regulation Act, 1949. Any acquirer exceeding 5% shareholding requires prior approval; acquiring a controlling stake requires both CCEA approval and an RBI 'fit and proper' clearance.

From a financial stability standpoint, IDBI Bank's re-privatisation tests how RBI balances strategic divestment goals against supervisory concerns about new, potentially non-banking owners controlling a large scheduled commercial bank. The bank had previously been placed under RBI's Prompt Corrective Action (PCA) framework from 2017 to 2021 due to high NPAs and capital stress — its exit from PCA makes it a viable privatisation candidate now.

For exam purposes, key concepts to link are: strategic divestment vs. partial divestment, LIC's role as both insurer and equity holder, RBI's prior-approval framework under the BR Act, and the broader privatisation policy signalled in Union Budgets 2021–22 and after.