The Finance Ministry has stepped in to defend one of the biggest bank privatisations India has attempted. In a detailed clarification issued on Thursday, October 29, it said the second round of bidding for IDBI Bank followed established procedure, that the reserve price was "neither decreased nor increased", and that the price discovered through the process raised the deal's value by Rs 3,917 crore.
The statement comes two weeks after the Cabinet Committee on Economic Affairs (CCEA) approved the sale of a combined 60.72% stake held by the government and LIC to Canada's Fairfax Financial Holdings at Rs 81 per share, a deal worth about Rs 52,878 crore.
Why the Ministry Had to Explain
The clarification follows reports questioning both the valuation and the decision to run a fresh "best-offer" round after the first set of bids was not approved. The ministry's answer is that every step had proper approval and that the process was designed so that neither bidders nor valuers could influence each other.
How the Bidding Worked
- First round (2025-26): Run by DIPAM under its internal practices, which the ministry describes as indicative guidelines rather than fixed rules. The initial bids were not approved, and the round ended.
- Who set the next step: The request for proposal allowed the government to decide what to do if the top bid fell short. Since DIPAM had no procedure for this situation, the Core Group of Secretaries on Disinvestment (CGD), using powers given by the CCEA, designed the second round.
- Fresh valuation: The CGD reviewed the valuation method in April 2026. Updated valuations began in May, after IDBI Bank's accounts for the year ended March 2026 were published.
- Double-blind check: Bidders did not see the valuations, and the valuers did not see the bids. Only the CGD had both in front of it.
- Final approval: Fairfax's offer of Rs 81 per share was accepted, and the CCEA cleared the sale on October 14.
The Valuation Question
Two independent advisers valued the bank using separate methods. The transaction adviser used a market multiple method, comparing IDBI Bank with listed public sector banks, because there were no suitable comparable deals. The ministry said IDBI Bank's own share price was not a reliable benchmark because of its volatility and thin trading volumes.
It also pointed out an unusual position: the RBI treats IDBI Bank as a private bank for regulatory purposes since LIC took a majority stake in 2019, but investors still valued it like a public sector lender.
The Tax Indemnity
At the request of qualified bidders, the government agreed to cover disputed tax demands through an indemnity, with potential liability capped at Rs 627 crore. The ministry argued this was a fair trade, since the bid price rose by Rs 3,917 crore, and said the risk was low-probability and revenue-neutral because the government will reimburse only additional demands that are actually paid.
Deal at a Glance
| Buyer | Fairfax Financial Holdings (Canada) |
| Stake sold | 60.72% (government and LIC combined) |
| Price per share | Rs 81 |
| Deal size | About Rs 52,878 crore |
| CCEA approval | October 14, 2026 |
| Value added by second round | Rs 3,917 crore, per Finance Ministry |
| Tax indemnity cap | Rs 627 crore |
| Residual stake | Government and LIC will keep minority holdings |
What It Means for Customers and Investors
For IDBI Bank's depositors and borrowers, nothing changes overnight. Accounts, loans and branches continue as before, and the bank remains regulated by the RBI. For shareholders, the government and LIC keep residual stakes, which the ministry says lets the public benefit from any rise in the bank's value under new ownership. For the government, the deal is a major boost to its disinvestment programme after years of delays.
A Long Road to the Sale
The government and LIC first invited expressions of interest to sell a controlling stake in IDBI Bank in October 2022, and the RBI later cleared the bidders who were found fit to own a bank. The process took far longer than first planned, slipping through several financial years because of regulatory checks and procedural issues. Getting it over the line makes IDBI Bank the most significant test so far of the Centre's plan to step back from running banks.
What Happens Next
The transaction still has to go through closing formalities and regulatory steps before Fairfax formally takes control. Expect continued political debate over the price, along with questions from employee groups about the bank's future under private ownership.
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