The Modi government is set to step on the gas to achieve its ambitious Rs 1.75 lakh crore disinvestment target for 2021-22 with the Union cabinet expected to set the ball rolling on the privatisation of IDBI Bank from next month.

Finance ministry officials said the Union cabinet was expected to consider a note on IDBI privatisation, which is apart from the two banks to be put on sale in the next fiscal. The cabinet is expected to deliberate on the amount of the stake to be sold by the government and the biggest promoter Life Insurance Corporation.

Sources have indicated that the government and Life Insurance Corp will look to sell their stakes in the bank. While the government owns about 45.28 per cent stake in the bank, LIC, the largest promoter, holds 49.24 per cent.

LIC was brought in when the bank was in trouble, but now the government considers the phase is over.

The bank was taken out of the RBI's prompt corrective action framework that imposes restrictions on the operations of banks whose bad loans exceed 25 per cent of assets.

Officials said the roadshows to sell the bank could begin by the end of next month immediately after the Cabinet approval. The government is open to foreign players bidding to take management control in the bank..

The government allows maximum foreign direct investment (FDI) of 74 per cent in private banks, while it allows 20 per cent in PSU banks under the government approval route.

The amendment to the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003 in the Finance Bill 2021 would enable it to be deemed to have obtained a (Banking) license under Section 22 of Banking Regulation Act, which would boost its sale prospects.

Finance minister Nirmala Sitharaman in the budget for 2020-21 has set a target to raise Rs 2.1 lakh crore from the privatisation and sale of minority stakes in state-owned companies.

This includes Rs 1.20 lakh crore from selling a stake in CPSEs and Rs 90,000 crore from stake sale in financial institutions.

So far this fiscal, the government has collected Rs 19,499 crore through minority stake sale in CPSEs and share buybacks.

The board of the bank last week has approved a plan to raise Rs 8,000 crore in rupee bonds.

IDBI Bank's managing director and CEO Rakesh Sharma had said the bank would now look to grow its business in a calibrated way with more focus on profitability and in improving efficiency ratios.

According to a regulatory filing by the bank to the stock exchanges, the money would be borrowed in one or more tranches during financial year 2021-22. The bank has also won approval to issue additional tier-I bonds and infrastructure bonds.

The share price of the bank on the BSE moved up 1.44 per cent to Rs 38.65 on Tuesday.