The Indian government is moving ahead with to pare its stake in and is expected to transferthe bank's pool of nonperforming assets to a fund in preparation for the stake sale,India's The Economic Times reported May2, citing "top-ranking sources."

The government will likely sell up to 10% of IDBI Bank to strategicinvestors to reduce its stake to below 50%, the sources said. The government iscommitted to going ahead with the plan in fiscal 2016-2017 despite protests fromthe bank's employees. India's Finance Ministry is expected to seek clarity on thecapital infusion plans of prospective investors, they added.

The government is also planning to transfer a large portion ofthe bank's NPAs, estimated at 200 billion rupees as of Dec. 31, 2015, to a new stressedasset fund. Reducing the bank's NPAs will result in a higher valuation, a sourcesaid.

While the government had previously planned to sell up to a 15%stake in IDBI Bank, sources have indicated that the Reserve Bank of India is notopen to allowing private investors to hold that much of a stake in the lender. Onesource said the central bank may permit the sale of a 10% stake. This could proveto be an obstacle as it remains unclear if foreign investors would be interestedin holding a stake of just 10% in the bank.

As of May 3, US$1 was equivalentto 66.53 Indian rupees.