Former Union government secretary EAS Sarma has raised fresh questions over the proposed sale of a 60.72% stake in IDBI Bank to Canadian financial services group Fairfax Financial Holdings, alleging that the transaction raises concerns about valuation, transparency and possible conflicts of interest. Sarma has urged Finance Minister Nirmala Sitharaman to suspend the disinvestment and order an independent judicial inquiry into the process.
His latest objections follow investigative reports about internal Department of Investment and Public Asset Management (DIPAM) documents detailing how the bank’s valuation and bidding process changed after the first round of offers fell below the government’s reserve price. Sarma has also pointed to a reported connection between an LIC director and a Fairfax subsidiary, arguing that it raises questions about potential conflicts of interest. The government, however, has defended the sale, saying the valuation methodology and revised bidding procedure were reviewed and approved through the prescribed decision-making process.
Why EAS Sarma Is Questioning the IDBI Bank Sale
Sarma, a former secretary to the Government of India, has written to Sitharaman demanding that the IDBI Bank disinvestment be scrapped or suspended until an independent investigation is completed.
In his November 2 communication, he reiterated concerns raised in earlier letters dated October 15 and October 31. He argued that the government was selling a valuable public financial institution without adequately establishing whether the agreed price reflected its underlying value.
His objections cover several areas:
- The difference between the original reserve price and the final accepted bid.
- The decision to introduce a revised valuation methodology after the first bidding round failed.
- The treatment of IDBI Bank’s property and other assets.
- The potential tax liabilities covered by the government under an indemnity arrangement.
- A reported relationship between an LIC director and a Fairfax subsidiary.
Sarma has described these developments as reasons for an independent examination of the transaction. His allegations and demands are not findings of wrongdoing by the government, LIC or Fairfax.
Fairfax Deal Values 60.72% Stake at ₹52,878 Crore
On October 14, 2026, the Cabinet Committee on Economic Affairs (CCEA) approved Fairfax Financial Holdings as the strategic buyer for a 60.72% stake in IDBI Bank.
The transaction covers the sale of 30.48% held by the central government and 30.24% held by Life Insurance Corporation of India (LIC).
The approved purchase consideration is approximately ₹52,878.08 crore.
| Transaction detail | Stake or value |
|---|---|
| Government stake being sold | 30.48% |
| LIC stake being sold | 30.24% |
| Total stake being sold | 60.72% |
| Approved purchase consideration | ₹52,878.08 crore |
| Government’s remaining stake | 15% |
| LIC’s remaining stake | 19% |
The transaction is intended to transfer management control to Fairfax while allowing the government and LIC to retain minority shareholdings.
The government has presented the sale as a strategic restructuring of IDBI Bank. Sarma, by contrast, questions whether transferring control to a foreign investor is in the public interest and whether the agreed valuation adequately reflects the bank’s assets and future potential.
The Reserve Price Dispute: ₹94.42 Versus ₹81 Per Share
One of the most significant issues concerns the change between the first and second rounds of bidding.
According to reports based on an internal DIPAM note dated August 13, 2026, the original reserve price was ₹94.42 per share.
The first round of financial bids was opened on March 12, 2026. Fairfax reportedly offered ₹75 per share, while the other qualified bidder also submitted an offer below the reserve price. Both bidders declined to match the original minimum price.
Instead of ending the transaction, the government continued the process and invited revised offers.
Fairfax subsequently submitted a revised offer of ₹81 per share. On July 13, officials opened the revised bid and the Core Group of Secretaries on Disinvestment (CGD) ordered fresh valuations under a revised methodology.
The new fair-value benchmark was eventually determined at ₹75.99 per share, below Fairfax’s ₹81 offer. The Cabinet approved the transaction in October.
| Valuation and bidding milestone | Per-share amount |
|---|---|
| Original reserve price | ₹94.42 |
| Fairfax’s first reported bid | ₹75 |
| Revised Fairfax offer | ₹81 |
| New fair-value benchmark | ₹75.99 |
Sarma argues that the new valuation approach effectively reduced the benchmark against which the winning offer was assessed. He believes the government should have considered reopening the sale to a wider group of potential buyers after the original bids failed.
Why the Government Defends the Revised Valuation
The Finance Ministry issued a clarification on October 29, defending the methodology and the decision to conduct a second or best-offer round.
It said the reserve price was neither increased nor decreased because the original bidding round had become functus officio, meaning it had ceased to have operative effect after the initial bids were not approved.
The ministry also said there was no predetermined benchmark for bidding. Qualified bidders independently valued the bank and submitted confidential offers, while independent agencies conducted contemporaneous valuations to assess whether the offers were reasonable.
According to the government, the CGD had been empowered by the CCEA to address procedural difficulties and approve deviations where necessary for effective implementation of strategic disinvestment transactions.
The ministry further maintained that the valuation methodology was reviewed in April 2026, before the revised bids were invited, and that the valuation agencies did not have access to the bidders’ financial offers.
The government said the revised process increased the discovered bid value by ₹3,917 crore compared with the initial Fairfax offer.
This is the central disagreement: Sarma questions the timing and substance of the revised valuation process, while the government argues that the second round followed the authority delegated to the CGD and that the final offer exceeded the new independent fair-value benchmark.
Questions Over IDBI Bank’s Property and Asset Valuation
Sarma has also questioned whether the valuation exercise adequately captured IDBI Bank’s real estate holdings and other assets.
He specifically referred to the bank’s property of more than 50 acres in a developed part of Hyderabad.
Sarma cited a recent Telangana government land auction that indicated a price of approximately ₹269 crore per acre. Applying that rate to IDBI Bank’s Hyderabad property, he estimated its value at around ₹13,450 crore.
He argued that the bank’s other urban properties could add substantially to its overall asset value.
However, this is Sarma’s estimate based on a comparable land transaction, not an independently established valuation of IDBI Bank’s entire property portfolio. Actual property values depend on ownership rights, location, permitted use, development restrictions and other factors.
The valuation dispute is particularly important because the price of a bank cannot be assessed only through its current share price or annual profits. Its capital position, loan book, liabilities, real estate, customer relationships and future earning capacity also matter.
Reported Conflict-of-Interest Concern Involving LIC and Fairfax
Another issue raised by Sarma concerns a reported connection between an LIC director and a Fairfax subsidiary.
Sarma cited an investigative report by Businessworld claiming that an LIC director had served on the board of a Fairfax subsidiary while LIC was participating in the sale of its IDBI Bank stake.
He argues that the reported overlap raises questions about whether appropriate safeguards were in place to manage potential conflicts of interest during the transaction.
At this stage, the reported board connection should not be treated as proof of misconduct or improper influence. Establishing an actual conflict would require examining the individual’s role, relevant dates, disclosure obligations, participation in decisions and any applicable recusal arrangements.
Sarma has called for an independent inquiry to establish the facts and determine whether the transaction was conducted with adequate safeguards.
Government’s Tax Indemnity Arrangement Raises Further Questions
The transaction also includes an indemnity arrangement covering certain disputed income-tax demands.
An indemnity is a contractual commitment to compensate another party for specified financial losses if certain conditions are met.
The government has said the potential tax liability covered under the arrangement is approximately ₹627 crore. Reimbursement would apply only if the additional tax demand is actually paid.
The Finance Ministry argues that this potential exposure is relatively limited compared with the ₹3,917 crore increase in the discovered bid price between the two rounds.
However, Sarma and other critics have sought greater transparency about the total tax demands covered, the conditions under which the indemnity would be triggered and the extent of the government’s financial exposure.
The issue matters because the buyer’s final acquisition cost and the government’s eventual proceeds can be affected by contractual arrangements beyond the headline purchase price.
IDBI Bank’s Financial Recovery Adds to the Valuation Debate
The bank’s financial performance is another reason the proposed sale has attracted attention.
IDBI Bank was placed under the Reserve Bank of India’s Prompt Corrective Action framework in May 2017 because of weak asset quality and financial losses. The restrictions were subsequently lifted in March 2021 after improvements in its financial position.
The bank has since reported a significant recovery in profitability and asset quality.
Its net profit reached a record ₹9,513 crore in FY2026, while its net non-performing asset ratio declined to approximately 0.15% by March 2026.
This recovery forms part of the broader debate about whether the bank’s current valuation adequately captures the improvements made through capital support, operational changes and regulatory oversight.
Sarma argues that the government should examine the bank’s future potential before transferring management control. The government maintains that the transaction has undergone an extensive valuation and bidding process.
The Bigger Picture
The IDBI Bank transaction raises wider questions about how the government values and sells public-sector financial assets. Strategic disinvestment involves more than identifying a buyer and agreeing on a price. It also requires transparent valuation methods, adequate competition, clear conflict-of-interest safeguards and an assessment of the long-term consequences of transferring management control.
The government’s defence rests on the authority of the CGD, independent valuation exercises and the fact that Fairfax’s final offer exceeded the revised fair-value benchmark. Critics want greater disclosure of the internal decision-making process, the valuation assumptions and the contractual protections provided to the buyer.
The competing positions make independent scrutiny and access to relevant transaction documents important for evaluating the concerns.
Looking Ahead
The next stage will involve the regulatory and transaction-completion process, including the necessary approvals from the Reserve Bank of India. Sarma’s demand for an independent inquiry could also keep questions about valuation, the reported LIC-Fairfax connection and the indemnity arrangement in public debate. As of November 2, the government has defended the transaction but has not announced that it will suspend the Cabinet-approved sale.
The key issue is whether the government can demonstrate that the transaction delivered a fair outcome for taxpayers and LIC policyholders while following appropriate procedures. Disclosure of the valuation reports, the relevant conflict-of-interest records and the full terms of the tax indemnity would help establish the factual basis for assessing the competing claims.
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