IDBI Bank’s ₹3,917 Crore Price Hike Raises Questions Over ₹52,878 Crore Privatisation Deal; Government Defends Valuation
India’s proposed privatisation of IDBI Bank has come under renewed scrutiny following the government’s decision to approve a ₹52,878 crore strategic stake sale to a subsidiary of Canada-based Fairfax Financial Holdings. The transaction, approved by the Cabinet Committee on Economic Affairs on October 14, 2026, involves the transfer of a combined 60.72 per cent stake held by the Government of India and the Life Insurance Corporation of India (LIC). The government has defended the valuation, maintaining that the bidding process was conducted through established procedures and independent assessments.
The controversy centres on an increase of ₹3,917 crore in the final bid value following a revised bidding exercise. The government says the additional amount was secured after qualified bidders were given an opportunity to improve their offers. The successful bid was placed at ₹81 per share, taking the total transaction consideration to approximately ₹52,878 crore.
According to the Finance Ministry, the original bidding process took place during the 2025–26 financial year. Five entities initially submitted expressions of interest, four qualified under the prescribed eligibility conditions, and two ultimately submitted techno-financial bids. However, the initial offers were not approved, prompting the government to consider alternative ways of completing the strategic sale.
The Core Group of Secretaries on Disinvestment subsequently decided to invite the qualified bidders to submit improved offers. The government maintains that the original reserve price was neither increased nor reduced during this exercise. Instead, the first bidding round was treated as concluded after the initial offers failed to receive approval, allowing a separate best-offer process to be conducted.
An important element of the revised exercise was the introduction of provisions relating to disputed income-tax demands. The government agreed to provide a limited indemnity against certain potential tax liabilities, following requests from qualified bidders. Officials have stated that the potential reimbursement exposure is approximately ₹627 crore and would arise only if the relevant additional tax demand is actually paid and qualifies for reimbursement.
The Finance Ministry argues that this limited potential liability helped secure a substantially higher offer. It has pointed out that the ₹3,917 crore increase in the discovered bid price is considerably greater than the estimated ₹627 crore potential exposure. The government has described the tax-related provision as a low-probability liability rather than a direct reduction in the sale proceeds.
The valuation itself was carried out using two independent methodologies: the Market Multiple Method and the Asset Valuation Method. Under the first approach, IDBI Bank was compared with other listed public-sector banks using relevant market valuation multiples. The second approach examined the bank’s assets and liabilities, including tangible and intangible assets, land and properties, and other financial considerations.
The average of the two independent valuations produced a benchmark price of ₹75.99 per share. The successful bidder’s offer of ₹81 per share was above this benchmark. The government has also stated that the winning offer exceeded the individual fair-value estimates prepared by both valuation agencies.
DIPAM Secretary Arunish Chawla has strongly defended the decision to proceed with the revised bidding process. In an interview published on November 5, he said that restarting the entire privatisation exercise would have involved significant delays and uncertainty. He argued that finding another investor willing to pay approximately ₹50,000 crore for the combined government and LIC stake would have been extremely difficult.
Chawla also clarified that both qualified bidders were given an opportunity to improve their offers simultaneously. While the highest bidder substantially increased its offer, the other bidder communicated that its existing proposal represented its best and final offer. The government subsequently accepted the improved offer after examining its reasonableness against the independent valuations.
Despite the government’s defence, questions remain about the timing and methodology of the valuation exercise. Critics have raised concerns about whether the revised bidding arrangements provided sufficient safeguards for public assets and whether the valuation process adequately reflected IDBI Bank’s future earnings potential, assets and business prospects.
The government’s decision has also triggered political opposition. Finance Minister Nirmala Sitharaman has defended the strategic restructuring, arguing that IDBI Bank had previously suffered from substantial bad loans and financial difficulties and required extensive reforms. She has highlighted the government’s efforts to revive the institution through professional management, improved lending practices and capital support exceeding ₹25,000 crore.
The proposed privatisation has also faced resistance from IDBI Bank employees and banking unions. A two-day nationwide strike was organised on November 2 and 3, with employees demanding that the government reconsider the transfer of management control. Their concerns include employment security, service conditions, pension benefits and the future public-sector character of the institution.
The United Forum of IDBI Officers and Employees has indicated that its next course of action will be considered at a core committee meeting scheduled for November 10. Employee representatives have also sought broader support from banking unions to strengthen their opposition to the transaction.
Under the proposed arrangement, the government will sell its 30.48 per cent holding, while LIC will transfer its 30.24 per cent stake. Following completion, the government is expected to retain 15 per cent ownership and LIC will continue holding 19 per cent. Together, their remaining shareholding will amount to approximately 34 per cent.
The transaction, however, has not yet reached financial closure. The Reserve Bank of India is examining the successful bidder’s eligibility, source of funds and compliance with the applicable fit-and-proper requirements. The buyer is required to finance the entire purchase consideration from its own resources rather than using IDBI Bank’s funds.
The RBI’s assessment will be an important step before the proposed transfer of ownership and management control can be completed. Until the necessary regulatory clearances are secured, the transaction remains subject to the applicable approval process.
The IDBI Bank privatisation has therefore developed into a broader debate over the valuation of public-sector financial institutions, the government’s disinvestment strategy and the balance between attracting private investment and protecting public assets. While the government maintains that the ₹3,917 crore improvement demonstrates the effectiveness of its revised bidding approach, questions surrounding the valuation methodology, tax indemnity provisions and employee safeguards continue to attract attention.
At the centre of the debate is whether the ₹52,878 crore consideration adequately reflects the long-term value and growth potential of IDBI Bank. The final assessment will depend not only on the approved transaction price but also on the transparency of the process, regulatory scrutiny and the bank’s performance under its proposed new ownership structure.
