By Santosh Kumar Mohapatra
The Union Cabinet’s approval on October 14of the proposed sale of a 60.72% controlling stake in IDBI Bank to Fairfax, led by Indian-born Canadian billionaire Prem Watsa, marks a significant shift in India’s banking policy. Valued at 52,878 crore, the transaction is being projected as a major step in banking reform. Now, the government and LIC together hold 94.72% in IDBI Bank. Of this, LIC’s holdings are 49.24%, while the government holds the remaining 45.48%.
Public shareholders hold 5.28%. LIC bought a 51% stake in IDBI Bank in 2019 for Rs 21,624 crores at an average price of Rs 61 per share. Following a Qualified Institutional Placement (QIP) in December 2020, the stake of LIC came down to 49%. But the central question is: why should public ownership be sacrificed after public institutions helped revive a distressed bank?
The government calls it “strategic restructuring” rather than strategic disinvestment. Yet terminology cannot obscure economic reality. When a foreign private investor acquires majority ownership and management control of a strategic financial institution, it amounts to both privatisation and foreignisation.
Under the proposed arrangement, the government’s shareholding will fall from 45.5% to 15%, while LIC will reduce its stake from 49.2% to 19%. Fairfax will obtain management control, subject to regulatory approvals, with completion anticipated by March 2027. But this is not merely a question of sale proceeds. It concerns workers’ rights, depositors’ interests, public accountability and the future of development-oriented banking.
Established in 1964 as a development finance institution, IDBI was intended to provide long-term finance for industrialisation and infrastructure. Its subsequent conversion into a banking company in 2004 reflected the broader shift towards market-oriented financial management. The bank later suffered from reckless credit expansion, loan defaults and mounting bad loans.
By September 2018, its gross NPAs had reached 31.78%, net NPAs 17.30% while its capital adequacy ratio had fallen to 6.22%. When the bank was in crisis, no private company came forward to rescue it. It was the public sector, particularly the government and LIC, that stepped in to support and revive the institution.
By March 2026, gross NPAs had declined to 2.32% and net NPAs to 0.15%. Capital adequacy had recovered to 26.65%, while net profit reached 9,513 crore in 2025–26 up around 27% from 7,515 crore in the previous year.
Today, it continues to operate nationwide with over 2,100 branches and 3,000+ ATMs across India, offering retail banking, corporate banking, treasury operations, loans, and digital services. But the central question is: why should public ownership be sacrificed after public institutions helped revive a distressed bank?
The government must explain why public institutions should bear the burden of rescuing troubled assets while private investors acquire control over their future earnings and strategic decisions. LIC’s investment in IDBI helped stabilise the bank, but the proposed sale will substantially reduce its ownership and influence. Public assets must not be evaluated merely by the immediate revenue they generate but by the future stream of dividends, taxes they pay to the government in addition to providing services to vulnerable sections of society and creating employment opportunities.
Economists, trade unions, particularly in the insurance and banking sectors, including AIIEA, AIBEA and BEFI, have opposed the proposed privatisation, expressing concerns about public ownership and the institution’s future.
Their concerns cannot be dismissed as mere resistance to so-called reform. Private management may prioritise profitability through workforce rationalisation, outsourcing, increased workloads and stricter performance targets.
It may also neglect employment generation, priority sector lending and the expansion of banking services to rural and underserved populations. If private ownership guarantees efficiency, why did private financial institutions trigger the 2007–08 global financial crisis and require government bailouts? In India, Global Trust Bank was rescued through its merger with public sector Oriental Bank of Commerce in 2004.
These examples demonstrate that private ownership does not guarantee efficiency, just as public ownership does not automatically mean inefficiency. The reform does not necessarily require privatisation or foreignisation. A bank can be made efficient and accountable while remaining under meaningful public ownership.
Foreign investment can bring capital and expertise, but acquiring investment is different from transferring management control. Parliament and the public deserve clear answers about the transaction’s financial rationale.
Strategic restructuring must not become a euphemism for surrendering public assets, workers’ interests and fi nancial sovereignty.
The writer is an Odisha-based economist and columnist.
