The Government of India has announced plans to sell its residual stake in IDBI bank, which was bailed out by state-owned insurer LIC last year.

Presenting the Union Budget 2020-21, Finance minister Nirmala Sitharaman said: “In the last few years, the government has taken concrete steps to bring our banking system to be robust.

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“However, there’s a need for greater private capital. Accordingly, it is proposed to sell the balance holding of Government of India-owned IDBI Bank to private, retail and institutional investors through the stock exchange.”

After divesting 51% stake into LIC, the Indian government holds 47.11% interest in the IDBI Bank, which it plans to exit fully.

Till last year, IDBI Bank had the highest ratio of bad loans among all state-owned lenders and was placed under Reserve Bank of India’s (RBI) corrective action framework.

The move comes after the Indian government said it will inject around INR700bn ($9.79bn) into public sector banks to improve liquidity situation and boost lending.

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Recently, Indian Overseas Bank received a capital infusion of INR43.6bn ($607.57m) from the federal government to meet regulatory requirements.

Soon after the takeover by LIC, reports emerged that majority stakeholder LIC is working on a turnaround plan to boost the profitability of IDBI Bank.

Among the immediate synergies identified included the selling of LIC policies through the bank’s branches.

Furthermore, to help bank depositors, the Indian government has also decided to increases depositor insurance to INR500,000 (about $6,995) from current INR100,000 ($1400).