Is IDBI Bank being sold at a low price? The government has revealed the full details of the ₹3,917 crore deal..

IDBI Bank Privatisation: The government has issued a clarification regarding questions raised about the sale of IDBI Bank—specifically concerning the bank’s valuation, the bid price, and the process followed during the second round. DIPAM (Department of Investment and Public Asset Management) has clarified that the entire sale process was conducted in accordance with established government regulations. According to the government, the second round of bidding resulted in an increase of ₹3,917 crore in the bank’s valuation. Meanwhile, the Canadian firm Fairfax is acquiring a stake in the bank at a price of ₹81 per share, whereas two independent agencies had determined its fair value to be ₹75.99 per share.

Did the government sell IDBI Bank at too low a price?
According to DIPAM, the reserve price—the minimum price set for the sale—was neither reduced nor increased. Since the bids from the first round were not approved, that round of the process was concluded. Subsequently, a new approach was adopted for the second round, referred to as the "best offer" round. This was approved by the Core Group of Secretaries on Disinvestment (CGD), acting under the authority granted by the Cabinet Committee on Economic Affairs (CCEA).

How was the bank’s valuation determined?
The government explained that bidding companies independently assess the bank’s value and submit their price bids confidentially. Additionally, the bank’s valuation was assessed by two independent agencies. The entire process was kept "double-blind"—meaning the bidders were unaware of the independent valuations, and the valuation agencies were unaware of the bid prices. The Core Group of Secretaries on Disinvestment (CGD) had access to both sets of information.

The bank’s valuation was determined by comparing it with other listed public sector banks. Furthermore, the bank’s assets, as well as any disputed tax claims, were taken into account. IDBI’s share price was not used as a basis for valuation due to its high volatility and low trading volume.

Clarification provided regarding the ₹627 crore tax liability
Questions were also raised concerning potential tax liabilities in relation to the bank’s sale. DIPAM has stated that an indemnity provision of ₹627 crore has been set aside for this purpose. This amount would only be payable in the event that a demand for additional taxes arises. In comparison, the bid value in the second round has increased by ₹3,917 crore. The government has characterized the likelihood of such a tax demand as low.

60.72% stake being sold for ₹53,000 crore
On October 14, the Cabinet approved the sale of a 60.72% stake in IDBI Bank for approximately ₹52,878 crore. This includes the government’s 30.48% stake (valued at about ₹26,620 crore) and LIC’s 30.24% stake (valued at about ₹26,440 crore). The deal is set to be executed with Canada-based Fairfax. This would represent one of the largest foreign investments in the Indian banking sector. Even after this transaction, both the government and LIC will retain their remaining stakes in the bank.

According to Finance Minister Nirmala Sitharaman, the government will retain a stake of approximately 15%, and LIC will hold about 19%. This ensures that both entities can continue to benefit in the future as the bank grows.

When will the IDBI Bank deal be completed?
The deal is expected to be concluded by the end of the current financial year. However, it remains subject to approval from the RBI. Bank employees have raised concerns regarding the protection of their employment terms, pensions, and other benefits; in response, the government has stated that there is no cause for concern among the staff.

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