NEW DELHI (Reuters) - India has put the initial public offering of the country’s biggest insurer Life Insurance Corp of India (LIC) on a fast track while the privatisation of two state banks is mired in procedural issues, two government and one industry source said. The listing of LIC is set to be India’s biggest ever IPO, with the government aiming to raise 800 billion-900 billion rupees ($11 bln-12.2 bln) from its stake sale. In all, the government plans to raise 1.75 trillion rupees from a privatisation programme in the current fiscal year ending in March, one of the sources said. It has selected 10 investment banks including Goldman Sachs, Citigroup and SBI Capital Market to handle the LIC initial public offering, the two government sources said. The sources declined to be identified as they were not authorised to speak to media. “The potential size of the IPO is expected to be far larger than any precedent in Indian markets,” one of the sources said, adding the LIC IPO has been put on a fast track as it could help partly meet budgetary spending plans. The government plans to spend 34.83 trillion rupees, including capital spending of 5.54 trillion rupees in the current financial year. A ministerial panel, called the Alternative Mechanism on strategic Divestment, is expected to decide soon on the size of the stake to be sold. It could be around 10%, sold in two tranches, the two government sources said. Sixteen banks including seven global banks and nine domestic bank had been in the race to handle the IPO. The other selected lenders are JM Financial Ltd, Axis Capital, Nomura, BofA Securities, J.P. Morgan India Pvt Ltd, ICICI Securities and Kotak Mahindra, said the source, who declined to be identified as he was not authorised to speak to the media. JP Morgan, Citigroup, BofA and Goldman Sachs declined to comment, while Nomura, JM Finance, Axis, Kotak and others were not immediately available for a comment. A finance ministry spokesman was not immediately available for comment. The roadshows would be held in coming months in all major global financial centres to attract investors and the government would make all efforts to attract retail investors and employees to invest in the company, one of the sources said. LIC, with assets of over 34 trillion rupees ($461.4 billion), has a subsidiary in Singapore and joint ventures in Bahrain, Kenya, Sri Lanka, Nepal, Saudi Arabia and Bangladesh. BANK PRIVATISATION The government had previously announced plans to sell at least two state-run banks in the current fiscal year, as part of its privatisation plans and to consolidate state banks, but has not named the banks. Plans to privatise the proposed two banks were going slowly, due to various procedural issues as well as internal assessments indicating limited appetite among investors to buy at the desired value, said one of the sources, a senior government official with direct knowledge of the matter. Another banking industry source, who participated in discussions, said despite a bullish market, there were few takers for weak banks saddled with bad loans. “There have been discussions on the sale of banks but thinking now has shifted to first look at monetising other assets and then come to banks after that,” the source said. ($1 = 73.7450 Indian rupees) Reporting by Aftab Ahmed and Manoj Kumar in NEW DELHI, Nupur Anand in MUMBAI and Scott Murdoch in HONG KONG ; Editing by Jason Neely and Susan Fenton Our Standards: The Thomson Reuters Trust Principles.