All due processes were followed in the strategic restructuring of IDBI Bank: Nirmala Sitharaman | Today’s news
Union Finance Minister Nirmala Sitharaman said on Friday that “all due process has been followed” in IDBI Bank’s strategic restructuring and that the lender is now ready for the next phase of growth.
Prime Minister Narendra Modi government “revived IDBI Bank through professionalism, prudence and recapitalization of more than ₹25,000 million crowns,” she said in a post on the X microblogging site.
Her comments were in response to Congress leader Rahul Gandhi’s claim that bids for IDBI Bank were seen first and then the sale price was fixed. Gandhi’s accusations followed a Business World report on Thursday that alleged the government had violated its own disinvestment rules, which required officials not to open bids before setting a floor price.
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The Fairfax-controlled entity is buying the combined 60.72% stake held by the government and LIC for ₹52,878 crore. After the transaction, the government and LIC will retain a combined 34%.
The initial bids were lower than the reserve price of ₹ 94.42 per share, so the government did a re-valuation before calling for the best bid.
The secretaries’ core divestment group compared the bids with fair value estimates from independent appraisal agencies. The winning bid of ₹81 per share beat the revised benchmark of ₹75.99 and fair value estimates from both agencies.
The Treasury said the process remained double-blind: the bidder did not know the valuation and the appraisers did not see the bids. She said a core group of secretaries reviewed the bids and awards to assess the bids.
The ministry said that a tax-related compensation was part of the transaction and that the ascertained offer price was increased by ₹3,917 crore. It put the potential tax liability at ₹627 million and described the possibility of its arising as unlikely and revenue neutral.
On 14 October, the government announced the sale of the combined 60.72% stake held by the government and the state-owned Life Insurance Corporation of India in IDBI Bank to an entity controlled by Fairfax for ₹52,878 million crowns. The government and LIC will hold 34% even after the deal closes.
“IDBI Bank was handed over to us in bad condition as IDBI itself was forced to lend to big business groups with close links to @INCIndia leaders like Videocon, Winsome, ABG Shipyard, Kingfisher etc. These turned into bad loans causing huge losses to IDBI Bank which we acknowledged,” Sitharaman wrote in her post.
IDBI Bank was placed under the Reserve Bank of India’s Stressed Lenders Remedial Framework in May 2017 and exited it in March 2021 after capital infusion and improved financial health.
Sitharaman’s post also drew attention to her ministry’s clarification on Thursday.
Read also | The government is defending the IDBI Bank sale process, saying the earlier norms were only indicative
Government clarification
On Thursday, the Union finance ministry said the internal disinvestment practices developed over time “are indicative guidelines and not hidden rules or regulations”.
“The preamble itself states that the proposed procedure cannot be construed as a rigid legal framework which may require appropriate modification/amendment,” the ministry said.
In 2017, the Cabinet Committee on Economic Affairs also empowered the Chief Group of Secretaries on Disinvestment (CGD) to “remove all difficulties, including procedural deviations, to ensure effective implementation of strategic disinvestment transactions,” he said.
The first round of bids, made under original internal guidelines and opened in March 2026, was lower than the reserve price ₹94.42 per share, leading to a new valuation.
The valuation methodology was later “reviewed by the CGD in April 2026 prior to the announcement of the best bids” in the second round, it said. The appraisers “started working on the revised valuations in May 2026. The process remained double-blind as the bidder did not know the valuation and the appraisers did not see the bids,” he added.
“It is only the CGD (group of senior officials) who will get the full picture and compare the bids with the real valuation to make a final call on the adequacy of the bids submitted,” he added.
Subsequently, the tenderer whose adjusted offer exceeded the offer of his competitors and the adjusted reference price ₹75.99 per share was declared the winner. “Best bid wins ₹81 per share was above the benchmark price as well as the fair value estimates of both independent valuation agencies. It was therefore deemed reasonable and approved,” said Arunish Chawla, secretary of the Department of Investment and Public Asset Management (Dipam) after a cabinet meeting to approve the sale.
The valuation did not take into account the market price of the bank’s share, as it fluctuated wildly between ₹61.01 a ₹118.38 per share, he said.
It also cited an October 14 press release that explained there was no “a priori benchmark for bidding.”
Read also | Fairfax faces culture test as it takes over IDBI Bank
Tax relief
The report also claimed that the government agreed to cover IDBI Bank’s disputed income tax cases to encourage suitors to match their bids after the first round failed, essentially handing over a “tax gift without a price tag”.
In its reply, the Ministry stated that the potential liability arising from this account was only ₹627 crore while the offer was sweetened ₹3,917 crore due to the move, “increasing the value of the transaction for the government and LIC”. Moreover, it “remains a low-probability, revenue-neutral event for the government,” he said.
The Business World report also claimed that the bank’s valuation was compared to that of other state-owned lenders, even though it is classified as a private bank.
In response, the ministry said the bank was a government-owned banking company until 2019, but became a government-controlled banking company after LIC acquired 49.24% in 2019.
Read also | Fairfax deal with IDBI puts CSB Bank’s future at a crossroads
