Concerns Raised Over IDBI Bank Disinvestment Process

EAS Sarma, a former Secretary to the Government of India, has raised serious concerns regarding the ongoing disinvestment process of IDBI Bank, asserting that the Department of Investment and Public Assets Management (DIPAM) has poorly managed the situation. In a recent letter to the Union Finance Minister, Sarma suggested that there may be undisclosed issues that could further complicate the disinvestment efforts.

Sarma's apprehensions stem from revelations that a director from the Life Insurance Corporation of India (LIC), which holds a significant pre-sale stake in IDBI, is also affiliated with Fairfax, the Canadian firm vying to acquire the bank. This dual role raises questions about potential conflicts of interest that could undermine the integrity of the disinvestment process. Sarma has called for an independent investigation into these matters, emphasizing the need for transparency and public discussion regarding the future of IDBI and other Central Public Sector Enterprises (CPSEs).

In his correspondence, Sarma criticized the rationale behind disinvesting public assets, arguing that it is misguided to claim that such actions will enhance management or generate fiscal resources. He expressed disbelief that the government would prefer to entrust IDBI's management to a foreign entity like Fairfax, which could repatriate profits abroad, rather than relying on domestic institutions like LIC. He cited a recent Supreme Court ruling that supports the idea of reevaluating auction processes for public assets to ensure they serve the public interest.

Financially, IDBI has shown significant improvement, with profits soaring from ₹2,439 crore in 2021-22 to ₹9,513 crore in 2025-26. Sarma pointed out that the average share price of IDBI has been on an upward trajectory, indicating that the government's sale price of ₹81 per share is substantially lower than its market value. He argued that the government should have opened the bidding process to a broader range of potential buyers, including other public sector banks, to ensure a fair valuation of IDBI's assets.

Looking ahead, Sarma's call for an independent inquiry could lead to a reevaluation of the disinvestment strategy for IDBI. If the government heeds these warnings, it may reconsider its approach to selling public assets, particularly in light of the potential social costs associated with transferring control to foreign firms. The outcome of this situation could have lasting implications for the future of public sector enterprises in India.