IDBI Bank, which was bailed out by the state-run Life Insurance Corporation (LIC) in January 2019, will be put up for sale by the government.

The government is also planning stake sales in Central Bank of India and Punjab & Sind Bank.

Ahead of this, the government could announce creation of a bad bank, where toxic assets of banks worth billions of dollars would be transferred. This would boost lending in the economy and improve the valuation of state-run banks before selling stakes in them, news agency Reuters reported quoting a government source.

The objective is to park bad assets of state-run banks into the proposed bad bank and later sell those assets at a discounted price in the market, the official said. "It will help clean up balance sheets of the banks and improve their valuation.”

The government also plans to announce the sale of a 10% to 15% stake in the LIC, the country's biggest insurer, in next week's budget, Reuters quoted two government sources as saying. This will be part of a privatisation push to improve public finances.

Efforts by Finance Minister Nirmala Sitharaman to divest government control of large companies such as Air India and Bharat Petroleum Corporation failed to make much headway in the current fiscal year because of the pandemic. The government will now renew its drive to sell stakes as it tries to shore up revenues following the deepest economic contraction in decades.

One of the sources told Reuters that the government will enact changes to a parliament law governing LIC, which has assets under management amounting to over $400 billion. "To facilitate the sale of government stake in the LIC, the government will get a parliament approval to amend the LIC Act," the first source said.

The government had announced plans to sell its stake in LIC last year. That got delayed by legal and administrative hurdles, the official told Reuters.

Sitharam will present the 2021/2022 budget on Monday.

Together, the plan is to raise Rs 2.5 trillion-Rs 3 trillion ($34 billion to $41 billion) in the next financial year, officials told Reuters, partly to set off the shortfall in proceeds this year.