A heated political debate has erupted over the proposed disinvestment of IDBI Bank, with Leader of Opposition Rahul Gandhi and Finance Minister Nirmala Sitharaman exchanging strong words. Gandhi asserted that public sector banks are vital tools for national development, not assets to be sold off, while Sitharaman accused past Congress governments of using banks as "personal entities" for political favors.
Gandhi Questions IDBI Bank Disinvestment
Rahul Gandhi voiced strong opposition to the government's decision to privatize IDBI Bank. He highlighted the bank's recent financial turnaround, noting that it had moved from losses seven years prior to earning over nine thousand crore rupees in profit last year. Gandhi argued that this turnaround was due to the hard work of its employees.
He further criticized the government for potentially reneging on a 2003 parliamentary promise to always retain at least 50 percent ownership in the bank. Post-sale, the government and LIC's combined stake would reduce to 34 percent. "A promise made to Parliament is a promise made to the people of India," Gandhi stated, emphasizing his solidarity with IDBI Bank employees and their service conditions.
Sitharaman Retorts with Allegations of Past Misuse
Finance Minister Nirmala Sitharaman sharply rebuked Gandhi's criticism, claiming that the Congress (INC) historically treated banks and financial institutions as personal tools. She cited numerous instances where, according to her, Congress leaders pressured bank employees to extend loans, bypassing prudent lending norms. Examples included alleged influence in LIC funds for Haridas Mundra in 1957, the removal of an SBI Chairman for resisting political pressure in 1976, and pressure on Central Bank of India for loans to Maruti.
Sitharaman specifically accused Congress-era banking of forcing IDBI Bank to lend to large business groups with close political connections, such as Videocon, Winsome, ABG Shipyard, and Kingfisher. These loans, she asserted, turned into significant bad debts, causing immense losses for IDBI Bank. She credited the Narendra Modi government with reviving IDBI Bank through "professionalism, prudence, and recapitalisation" exceeding ₹25,000 crore, positioning it for future growth.
Details of the IDBI Bank Sale
The government's decision to sell a 60.72 percent stake in IDBI Bank to Fairfax Financial Holdings of Canada for approximately ₹53,000 crore (USD 5.5 billion) was approved on October 14. This transaction represents a significant step in India's banking privatization process and marks the largest foreign investment in an Indian bank.
The deal involves Fairfax acquiring the government's 30.48 percent stake, valued at about ₹26,620 crore, and LIC's 30.24 percent stake, valued at about ₹26,440 crore. The offer price of ₹81 per share surpassed the benchmark fair value of ₹75.99 per share set by independent valuation agencies.
"Congress-era banking had a phonebook for the powerful and a rulebook for the common citizens. The era of 'connection and setting banking' is over. Common people now have easy access to loans, and employees are not under pressure to extend loans over the phone calls," Sitharaman stated, reaffirming the government's commitment to transparent and professional banking practices.