IDBI Bank stake sale: Why employees are protesting against Fairfax deal and demanding privatisation rollback
Canadian billionaire Prem Watsa-led Fairfax Financial Holdings' proposed $5.5 billion (around ₹53,000 crore) acquisition of a majority stake in IDBI Bank has triggered opposition from employee unions and political parties, with concerns ranging from the lender's valuation and transparency of the disinvestment process to the future of employees and public ownership.
The proposed transaction, approved by the Indian government on October 14, involves the sale of a combined 60.72% stake held by the Centre and Life Insurance Corporation of India (LIC) to Fairfax. If completed, it would mark the largest foreign investment in India's banking sector and a significant step in the government's long-delayed banking privatisation programme.
IDBI Bank employees have staged a nationwide strike, while the Congress has questioned the valuation and demanded a parliamentary investigation into the transaction.
Here are the key reasons behind the opposition to the Fairfax-IDBI Bank deal.
One of the biggest objections raised by employee unions concerns the valuation at which the government and LIC are proposing to sell their combined stake.
The United Forum of IDBI Officers and Employees (UFIOE) has argued that the proposed transaction does not adequately account for the bank's assets, properties, institutional capabilities, customer relationships, future earnings potential and strategic importance.
The union has questioned the valuation methodology, particularly the treatment of IDBI Bank compared with public and private sector lenders.
"When it comes to regulation and court rulings, IDBI Bank is treated as a private sector bank. But for valuation purposes, it is being compared with public sector banks," said Devidas Tuljapurkar, convener of UFIOE.
In India, government-owned banks generally command lower market valuations than private sector lenders, making the choice of comparable institutions an important issue in determining the sale price.
The union has demanded that the government disclose the valuation methodology, underlying assumptions, treatment of real estate and other assets, and the basis on which it accepted the proposed consideration.
Fairfax has agreed to pay ₹81 per share, above the benchmark fair value of ₹75.99 determined by two independent valuation agencies. However, employee representatives argue that the valuation process requires greater transparency.
Opposition from employees has translated into industrial action, with the United Forum of IDBI Officers and Employees organising a two-day nationwide strike against the proposed transfer of majority ownership to Fairfax.
The strike concluded on Tuesday, with the union claiming it received significant support from employees and officers across the country.
UFIOE has said it will decide its next course of action at a core committee meeting scheduled for November 10, where it will consider intensifying its protest.
"The strike got a massive response from employees and officers across the country. We will decide the future course of action in our core committee meeting post Diwali on November 10 on the way to intensify struggle," Tuljapurkar said.
The union also plans to approach the United Forum of Bank Unions (UFBU) to secure wider support, including the possibility of a nationwide banking strike.
Employee representatives have urged the government to withdraw the privatisation proposal and retain majority ownership by increasing its stake above 51%.
They have also called for safeguards to protect employee interests and public investment in the lender.
The proposed sale has also triggered political opposition, with the Congress alleging irregularities in the disinvestment process and demanding that the transaction be halted.
Congress general secretary in-charge of communications Jairam Ramesh on Monday described the IDBI Bank disinvestment as a "scam" and called for a Joint Parliamentary Committee (JPC) investigation into the entire process.
He alleged that a foreign company was acquiring IDBI Bank from the government using funds belonging to the bank itself.
"This is yet another major scam by the Modi government, which warrants an investigation. We demand that the process of selling IDBI Bank to a foreign company be halted," Ramesh said in a post on X.
The Congress has questioned the valuation and transparency of the transaction, arguing that the government must explain the basis on which it decided to transfer control of the lender to a foreign investor.
These allegations are political claims and have not, on the information provided, been established as findings of an independent investigation.
Leader of Opposition Rahul Gandhi has also backed the protesting IDBI Bank employees and opposed the transfer of control to Fairfax.
In a statement, Gandhi argued that public sector banks play a broader economic role beyond their commercial operations and should not be treated simply as assets available for disinvestment.
"Public banks are not assets to be sold off, they are tools to build the nation," Gandhi said.
The Congress has maintained that retaining public ownership of banks is important for safeguarding public investment and their role in supporting the economy.
The party's opposition has added to the political pressure on the government over the proposed transaction.
The government has defended its decision to sell a majority stake in IDBI Bank, arguing that the lender had faced serious financial difficulties following years of bad lending and required substantial intervention to recover.
Finance Minister Nirmala Sitharaman said IDBI Bank had been left in poor financial condition after lending to large corporate groups during previous administrations.
Responding to Rahul Gandhi's criticism, Sitharaman cited exposures to companies including Videocon, Winsome, ABG Shipyard and Kingfisher, which eventually turned into bad loans and caused significant losses for the bank.
"These turned into bad loans, causing huge losses for IDBI Bank, which we recognised," she said in a social media post.
The finance minister also said the lender had been revived through "professionalism, prudence" and recapitalisation of more than ₹25,000 crore.
The government's position is that the proposed disinvestment is part of a broader effort to improve the banking sector's efficiency and bring in strategic private investment.
Employee representatives have also called for greater transparency regarding the proposed buyer.
The union has sought detailed scrutiny of Fairfax's ownership structure, financial strength and regulatory record, along with any substantiated controversies in its home jurisdiction.
It has argued that the identity and credentials of the strategic buyer should be examined transparently before control of a major Indian bank is transferred.
The transaction is subject to regulatory clearance from the Reserve Bank of India (RBI), which will examine the proposed change in ownership.
The proposed privatisation has also raised concerns about the future of IDBI Bank's workforce and the representation of employees from historically disadvantaged communities.
IDBI Bank reportedly has 19,108 employees, including approximately 9,500 belonging to Scheduled Caste (SC), Scheduled Tribe (ST) and Other Backward Classes (OBC) categories.
The lender also has 6,911 women employees and 884 differently abled employees.
Employee unions have sought assurances that the change in ownership will not adversely affect jobs, service conditions, employee benefits and existing safeguards.
They have argued that the government must protect employees' interests as part of any ownership transition.
The Indian government approved the sale of a combined 60.72% stake in IDBI Bank to Fairfax Financial Holdings on October 14.
Fairfax will acquire the government's 30.48% stake and LIC's 30.24% holding at ₹81 per share.
The government currently holds 45.48% equity in IDBI Bank, while LIC owns 49.24%.
The transaction is expected to be completed by the end of the current financial year, subject to regulatory approvals, including clearance from the RBI.
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