Canada-based Fairfax Financial Holdings is set to acquire a controlling stake in financially troubled IDBI Bank for ₹52,878 crore after the Union Cabinet approved the deal on Wednesday, October 14.
The strategic sale of has been in the works since 2022, with the government and the Life Insurance Corporation of India (LIC) together selling a 60.72% stake in the lender and transfer management control.
With this, the government’s stake in the bank will fall from 45.5% to 15%, while LIC’s holding with decline from 49.2% to 19%. Both will withdraw their nominees from the Board and become public shareholders, as per the official release.
The transaction had been delayed due to regulatory approvals and completion of the due diligence process by prospective bidders, as per media reports.
What happens to IDBI Bank staff?
After the announcement became public, people took to social media to question the government about staff welfare and job security, particularly for employees who had joined IDBI Bank through the public-sector bank exam and are now facing a change in ownership and management control.
Responding to one such query, the said that the IDBI Bank stake sale went through a transparent and fair bidding process and that the interests of employees have been protected.
“The entire process went through transparent and fair bidding process. The interests of serving and retired employees have also been protected in the process,” the government commented on X (formerly Twitter).
The ministry also shared FAQs providing further details about the deal. However, the documents did not address anything about employees or retired staff. More information about this subject is awaited.
IDBI employees’ forum opposed stake sale
In July this year, the United Forum of IDBI Officers & Employees expressed “profound concern” over the government’s move to sell its controlling stake in the lender to Fairfax and sought a parliamentary review of the sale, according to a news report by Business Standard.
The Forum urged the government to make the deal’s full proposal public, review the decision in light of India’s “long-term financial and economic sovereignty”, honour assurances made before Parliament during the bank’s restructuring, and hold a parliamentary discussion before taking any irreversible decision.
It also called on the government to protect the interests of employees, depositors and customers while preserving public ownership of strategically important banking institutions serving national developmental objectives.
Largest FDI in financial sector
IDBI Bank, which had been grappling with poor financial health for years, was placed under a Prompt Corrective Action (PCA) framework in 2017. Two years later, LIC infused ₹21,624 crore into the lender in exchange for preferential shares, acquiring a controlling stake in the bank.
This reduced the government’s stake to below 51%, prompting the Reserve Bank of India (RBI) to reclassify IDBI Bank as a private-sector bank.
will still be required to present its credentials to RBI in accordance with the fit and proper assessment conducted at the expression of interest (EoI) stage and submit its roadmap for the compliance of regulatory conditions prescribed therein. Once completed, this will be the largest FDI in the financial sector of our economy so far, the government noted in the release.
Shares of IDBI Bank closed ₹90.44 rupees per share, up 9% on the day. The announcement came after the close of trade.