by Shri E A S Sarma, Former Secretary to the Government of India, Visakhapatnam
04/09/2026
To,
Smt Nirmala Sitharaman
Union Finance Minister
Dear Smt Sitharaman,
I have seen a report to the effect that DIPAM is about to finalise the sale of government’s and LIC’s equity shareholding to Fairfax, an overseas firm, at an abysmally low price, that too ignoring the conflict of interest arising on account of that firm already controlling operations in another domestic bank.
In that connection, I refer to the objections I had raised in my letter of 16-7-2026 (https://countercurrents.org/2026/07/e-a-s-sarma-urges-government-to-halt-idbi-privatisation-citing-legal-violations-and-breach-of-parliamentary-assurance/) against the government rushing desparately into selling its equity share for a price that is far below the potential market value of IDBI, especially the value of its land and building properties located in prime urban areas across the country, and ignoring the legal concerns involved.
I reiterate those concerns below.
Legal issues:
On the face of it, there are two serious legal concerns about the disinvestment of IDBI, as follows:
- IDBI has in its possession several highly valuable land assets across the country. Several of them were acquired in the past under the earlier land acquisition Act of 1894 on the premise that such acquisition was for a “public purpose”, which was defined in Section 3(f)(iv) as for a company wholly owned/ controlled by the government. In other words, if IDBI were to slip into the hands of a private company, all such lands should revert to the government, as otherwise it would imply an outright violation of that statutory provision. The bid documents make no mention of this!
- Section 5(1) of the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003 implicitly provides an assurance that under no circumstances, the service conditions of IDBI’s employees be altered. The terms of disinvestment of IDBI, as spelt out by DIPAM, violate that provision.
Undervaluation of IDBI’s intrinsic worth:
It appears that, in an undue haste to sell government’s and LIC’s equity to the overseas firm, DIPAM has gone to the extra-ordinary extent of lowering the reserve price significantly.
IDBI has highly valuable urban properties across the country.
For example, there is a 50+ acre land property held by IDBI in a highly developed area of Hyderabad, where a recent auction conducted by the Telangana State government revealed a market value of Rs 269 Crores per acre. On that basis, IDBI’s Hyderabad land holding alone should be valued at Rs 13,450 Crores! If other urban properties of IDBI were to be valued similarly, the total value of its lands would be phenominally high.
Considering the additional value of IDBI’s human resources and the value addition resulting from its involvement in several development schemes undertaken on behalf of the government, the reserve price at which DIPAM is trying to finalise disinvestment, in the absence of competition, would result in its selling government’s and LIC’s equity holdings at an unconscionably low price, hurting the public interest.
At the cost of repetition, I wish to underline ny other concerns as follows:
IDBI’s welfare mandate:
As of now, the Centre and the LIC hold more than 90% of the equity of IDBI. As such, it is a public sector entity subject to SC/ST/OBC reservations mandated by the Constitution and, also the welfare mandate envisaged in the Directive Principles. As and when 60.72% of its equity is privatised, as is the intention underlying disinvestment, the government will be permanently putting an end to such reservatiions and shutting doors for the welfare benefits of IDBI, depriving SCs/STs/OBCs of their entitlement to employment opportunities through IDBI, in addition to introducing uncertainty in the future of the existing 9,500 such employees from the disadavantaged sections. Reservations for the disadvantaged primarily result in empowering those communities and it is unfortunate that the government should ignore it and go ahead with privatisation.
It is in that context that the SC/ST/OBC employees of IDBI have rightly demanded that the government should protect their rights (https://www.thehindubusinessline.com/money-and-banking/idbi-bank-sc-st-and-obc-employees-forum-seeks-protection-of-rights-careers/article70521406.ece) The government cannot afford to brush aside their fears.
In addition, one should also remember that IDBI has stood by government’s policy to empower women and provide reservations for differently abled persons. IDBI’s workforcecomprises 6,911 women employees and 884 differently abled employees. Privatisation would put an end to this, apart from creating uncerainty in the lives of those existing employees.
IDBI’s role till date is that of a development finance institution with a network of 2,122 branches across the country, providing access to people in many remote areas. IDBI hosts more than 18.72 lakh accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY); more than 10.86 lakh Bank account holders under Pradhan Mantri Suraksha Bima Yojana (PMSBY); more than 3.81 lakh Bank account holders under Pradhan Mantri Jeevan Bima Yojana (PMJJBY); more than 5.48 lakh Bank account holders under Atal Pension Yojana (APY); maintains 191 Aadhaar Enrolment Centres; one Rural Self Employment Training Institute (IDBI-RSETI) at Satara District which trained 7,165 candidates out of whom 5,241 have got employed. Would not privatisation put an end to all this?
Due to re-classification of IDBI Bank as a “private sector bank” by RBI, Metro and Urban Branches of IDBI Bank have unfortunately stopped providing interest subvention for KCC loans to farmers since March, 2019. If the Bank goes into the hands of private/foreign players, even the semi-urban and rural branches are likely to be stopped from lending to farmers. IDBI may also stop giving small loans viz., MUDRA/PMSVANIDHI/Stand Up India, education loans to students which are normally offered as unsecured loans.
Breach of an assurance given to the Parliament:
In the 13th Lok Sabha, the Parliamentary Standing Committee on Finance dealt in detail with the IDBI (Transfer of Undertaking and Repeal) Bill 2002 and in its 46th Report of June, 2003 at Para 33 had observed as follows:
“The Committee are given to understand that there is huge investment of Rs. 10,000 crores by general public in IDBI which is not secured. They are of the opinion that this dispensation holds good so long as IDBI is a Government owned banking company, but the day the Government holding in converted IDBI comes below 51% there will be chaos – like situation in the country making investors panicky. Hence, they recommend that the Government should make provisions which will ensure that Government’s shareholding in IDBI do not come below 51%”
The then Finance Minister to Lok Sabha on 08.12.2003 and Rajya Sabha on 15.12.2003 gave an assurance that Government shall at all times maintain not less than 51% equity holding in IDBI as a Banking Company. The above assurance was taken on the records of the Government Committee on Assurances.
In other words, the decision taken by the present government to disinvest IDBI constitutesa a breach of that Parliamentary assurance.
As on 31-3-2026, public deposits in IDBI stood at Rs.3,47,163/- crores, as against IDBI’s total business of Rs.6,00,789/- crores. Many small investors have invested their hard earned savings in IDBI, assuming that it has the government’s backing. Privatising IDBI would imply letting them down, without their consent.
According to IDBI’s disclosure of July 14, 2026 to NSE, neither the bank nor its shareholders are aware of DIPAM’s proposal. Should not the small shareholders of IDBI have been taken into confidence?
No competition for IDBI privatisation:
On the face of it, the IDBI disinvestment exercise has all along been a non-starter. Initially, as per reports, there were three bidders, Fairfax, Kotak and NDB.
Kotak has announced its exit from the bidding process (https://www.newindianexpress.com/business/2026/Feb/09/idbi-bank-sale-just-two-foreign-bidders-in-the-fray-as-kotak-quits-the-race)
Fairfax faces a conflict of interest as it has acquired a majority share in the Catholic Syrian Bank (https://www.fairfaxindia.ca/press-releases/fairfax-india-to-acquire-51-of-the-catholic-syrian-bank-ltd-2018-02-20/)
In other words, the only contender for IDBI is Fairfax which already controls one bank in India. It has been the well established policy of RBI, the banking regulator not to permit the same promoter to control two banks at time. If DIPAM considers disinvesting IDBI in favour of Fairfax, the deal will stand ab initio invalid as it involves a clear conflict of interest.
It may also be noted that DIPAM has excluded CPSEs in India from bidding for IDBI but not excluded entities controlled by foreign governments and other foreign entities. Such exclusion is not only discriminatory but also, it has resulted in a questionable outcome as above.
Reservation of posts in IDBI:
For all practical purposes, IDBI is a CPSE which has all along provided reservation for SCs/STs/OBCs as per the Constitutional requirement. Diluting government’s and LIC’s equity would imply meting out injustice to those disadvantaged sections of the society.
Against the above background, I feel that the balance of advantage lies in favour of dropping the proposal to privatise IDBI.
If the government remains obstinate and goes ahead with the proposed sale of equity holding in IDBI, it would not only be unfair to the public but also it would be unfair to lakhs of LIC’s policy holders who have a stake in it indirectly.
I am afraid that the proposed sale, if finalised as above, would raise concerns of a scam-like transaction, reminding one of a similar scam-like exercise of disinvestment in thepast of another CPSE, Central Electronics Ltd (CEL), which the Centre had to hurriedly abort to its embarrassment.
In my view, instead of wantonly selling equity in IDBI, the government should focus on strengthening IDBI by enabling it to fulfil its role as a development finance institution.
As pointed out by me again andagain, disinvestment of CPSEs to raise fiscal resources is a futile and counter-productive exercise, which needs to be revisited.
Regards,
Yours sincerely,
E A S Sarma
Former Secretary to the Government of India
Visakhapatnam