New Delhi: On paper, it is a government selling a stake in a bank. In practice, the planned sale of IDBI Bank has become one of the most argued-over disinvestment deals in years.

The Union Cabinet approved the strategic sale of a 60.72 per cent stake in IDBI Bank on October 14, to a subsidiary of Canada-based Fairfax Financial Holdings, for about Rs 52,878 crore. The Centre and Life Insurance Corporation of India (LIC) will share the proceeds. After the deal, the government will keep 15 per cent and LIC 19 per cent.

The bank needed rescuing only a few years ago. It is now profitable. That is why the central question has shifted from whether to sell to whether the price is fair.

Key takeaways

1. The deal: 60.72 per cent of IDBI Bank goes to Fairfax, with management control. The Centre sells up to 30.48 per cent and LIC up to 30.24 per cent.
2. The price: The sale was struck at Rs 81 a share. That is above a reported fair value of Rs 75.99 but below the roughly Rs 90.40 market price on approval day.
3. The sticking point: An earlier reserve price of Rs 94.42 a share was reportedly not met in the first round. Critics say the valuation yardstick was then changed. The government says the reserve price stayed the same.
4. The turnaround: IDBI was placed under the Reserve Bank’s Prompt Corrective Action framework in 2017, with restrictions lifted in 2021. It reported a net profit of Rs 9,513 crore for 2025-26.
5. Who is objecting: Opposition leaders, former officials, commentators and the bank’s own employees.
6. The government’s reply: The Finance Ministry says the process was sound, two independent advisers valued the bank, and the revised bidding secured a higher price.

The deal at a glance

How IDBI got here

IDBI’s story is the reason the sale is so charged. Over the years, public money repeatedly went into the bank to keep it afloat. It entered the Reserve Bank’s Prompt Corrective Action framework in 2017, a regime that restricts lenders in poor financial health. LIC took a controlling stake in 2019, buying around 51 per cent for about Rs 21,600 crore at an average of roughly Rs 61 a share.

Then came the recovery. Restrictions were lifted in 2021, subject to monitoring, and profits have risen steadily since. The bank reported a net profit of Rs 9,513 crore for 2025-26. A lender that was a rescue case is now a money-maker, and many people argue that a profitable franchise should command a richer price.

The case against the price

Critics have raised several points, and they are worth separating.

The price versus the market. At Rs 81 a share, the sale price sits roughly 10 per cent below the reported market price on the day of approval. Buyers of control stakes usually pay a premium, not a discount, so critics say this needs explaining.

The reserve price. Critics say bids first fell short of an earlier reserve price of Rs 94.42 a share and that the valuation benchmark was then revised. They have asked why, and have sought an independent inquiry and a parliamentary debate before control is handed over.

Restricted competition. Questions have also been raised over the exclusion of public sector bidders and how much of the valuation process was disclosed.

Hidden assets. A former finance secretary has argued the bank could be worth far more than the accepted price. Other critics point to IDBI’s property holdings, including prime land in cities such as Hyderabad, and ask whether that value was properly counted. Opposition leaders have asked why the Centre appears in such a hurry.

A pointed comparison. One commentator noted that the sale amount is close to the capital put into the bank over the years, which in his reading means buyers paid little for the franchise itself.

The government’s case

The Finance Ministry has pushed back. Its clarification makes four points:

• The reserve price did not change between the first and second rounds of bidding.
• The first round fell through because the initial offers were not approved, so a revised bidding procedure followed. The ministry says it secured a Rs 3,917 crore increase in the discovered price.
• Two independent advisers valued the bank using different methods. One relied on market multiples of listed public sector banks. The other looked at assets, including disputed tax demands.
• The valuation methodology was reviewed by the relevant ministerial group in April 2026, before fresh bids were invited.

What commentators agree on

Some of the more careful commentary lands in the middle. Privatisation is not wrong simply because a bank has become profitable, but profitability does raise the bar for proving that the price is fair. Equally, a claim that the bank is worth double the accepted price is an opinion, not an independent valuation, and a bank’s worth depends on earnings, credit costs, capital needs and the quality of its deposits and assets. The fair conclusion is that no breach of process has been demonstrated, but also that the absence of a demonstrated breach does not prove the deal was fair. Transparency and recorded reasons matter either way.

What employees want

IDBI’s employees have opposed the sale and asked for it to be suspended. Their concerns reportedly include reservation provisions, service conditions and pension benefits. The Finance Ministry’s clarification came amid these concerns.

What to watch next

1. Whether the government releases more of the valuation reasoning. Pressure for disclosure is growing.
2. Any parliamentary discussion or demand for an independent inquiry.
3. Regulatory clearances needed before the transfer of control.
4. Employee protests and any assurances on jobs, reservation and pensions.
5. The bank’s share price as the market digests the deal.
6. Fairfax’s plans for the lender once management control passes.

FAQs

Who is buying IDBI Bank?
A subsidiary of Fairfax Financial Holdings, a Canadian firm led by Prem Watsa.

How much is the deal worth?
About Rs 52,878 crore for a 60.72 per cent stake, at Rs 81 per share.

Who is selling?
The Government of India and LIC, which will share the proceeds.

Will the government and LIC exit completely?
No. The Centre will retain 15 per cent and LIC 19 per cent.

Why is the sale controversial?
Critics say the price may undervalue a bank that is now profitable, and question changes to the process and limits on competition.

What does the government say?
The Finance Ministry says the reserve price was unchanged, independent advisers carried out the valuation, and the revised bidding raised the discovered price by Rs 3,917 crore.

Was IDBI really rescued in the past?
Yes. It was put under the Reserve Bank’s Prompt Corrective Action framework in 2017, received repeated capital support, and LIC took a controlling stake in 2019.

 

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