The banks include Goldman Sachs and Deutsche Bank, reports Reuters.

At the current market price, the Coal India stake sale will raise about 79 billion rupees ($US1.2b) for the government.

Others selected for the stake divestment are Bank of America Merrill Lynch, Credit Suisse and Indian banks SBI Capital, JM Financial and Kotak Mahindra Capital, sources told Reuters.

The share sale could be launched in October depending on the market conditions, they said.