New Delhi: The government on Friday issued a detailed clarification on the strategic restructuring of IDBI Bank, defending the process that led to the sale of a 60.72 per cent stake in the lender to a subsidiary of Canada-based Fairfax Financial Holdings for Rs 52,878 crore. The Finance Ministry said the Government of India and Life Insurance Corporation of India (LIC) will retain residual shareholdings so they can benefit from the upside expected from value enhancement after the restructuring, news agency IANS reported.

Source: IANS

The Cabinet Committee on Economic Affairs (CCEA) approved the deal on October 14. The winning bid was Rs 81 per share: the government is selling 30.48 per cent of its stake and expects to receive over Rs 26,500 crore, while LIC is selling 30.24 per cent for over Rs 26,300 crore. After the transaction, which is expected to be completed by the end of the financial year, the government will hold 15 per cent and LIC 19 per cent, and neither will have a seat on the bank's board, The Hindu BusinessLine reported.

Source: The Hindu BusinessLine

Rs 52,878 croreTotal value of the 60.72% stake sale
Rs 81Winning bid per share (Fairfax)
Rs 3,917 croreExtra value from the second bidding round
15% / 19%Residual stakes of Govt / LIC after the sale

On the sharpest question — whether the reserve price was quietly lowered to favour the winning bidder — the Department of Investment and Public Asset Management (DIPAM) said the reserve price was neither decreased nor increased during the second, or best-offer, round, and that the revised process raised the discovered bid price by Rs 3,917 crore. The first bidding round, held in 2025-26, became functus officio after its bids were not approved, DIPAM said.

Source: The Hindu BusinessLine

DIPAM said the procedure for the second round was set by the Core Group of Secretaries on Disinvestment (CGD), which the CCEA had empowered to address procedural issues and make necessary deviations, and that its internal guidelines are indicative rather than rigid rules. The valuation was done by two independent advisers using distinct methodologies, in a double-blind process in which bidders did not know the valuations and valuers did not see the bids. A tax-related indemnity sought by bidders carries a potential liability of only Rs 627 crore, which the ministry called a low-probability, revenue-neutral arrangement, since reimbursement would apply only if an additional tax demand is actually paid.

Source: The Hindu BusinessLine

Finance Minister Nirmala Sitharaman has described the transaction as a strategic restructuring rather than a strategic disinvestment. The clarification comes amid scrutiny of the privatisation, including concerns raised by bank employees over reservation provisions and protection of service conditions and pension benefits. On Friday, Leader of Opposition Rahul Gandhi criticised the sale, alleging that banks built up in an earlier era were being sold under the present government, and extended support to IDBI Bank employees, ANI reported.

Source: ANI

IDBI Bank was a government-owned banking company until 2019, when LIC acquired a majority stake and it became a government-controlled banking company. DIPAM said LIC will have to dilute a further 4 per cent stake in the bank within two years to retain ownership of LIC Housing Finance.