IDBI Bank Staff Forum Fights Fairfax Stake Sale

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A union forum of IDBI Bank staff has come out against the planned sale of a majority stake in the lender to Canada's Fairfax Financial Holdings. The United Forum of IDBI Officers and Employees demanded on Thursday that the process be suspended at once and reviewed by Parliament.

The forum calls the decision ill-timed and inadequately justified. Convener Devidas Tuljapurkar spoke at a national convention on IDBI privatisation in New Delhi. "We are seriously concerned that the transaction may undervalue IDBI's properties, institutional capabilities, customer relationships, future earnings and strategic importance," he said.

What the forum wants disclosed

Tuljapurkar said the government must publish its valuation methodology, the assumptions behind it, the treatment of real estate and other assets, and the basis for accepting the price. The buyer's ownership structure, financial strength, regulatory record and any substantiated controversies at home must also be examined openly, he said. Regulatory approval cannot replace public accountability for handing control of a major Indian bank to a new owner, he added.

The forum also called the decision a betrayal of an assurance given to Parliament when IDBI became a banking company. Then Finance Minister Jaswant Singh had said government shareholding would stay at 51 per cent or more. Tuljapurkar said the government owes an explanation of how the sale honours that commitment.

He raised concerns about the social content of banking as well. Reservation, opportunities for historically disadvantaged communities, job security, financial inclusion and development-oriented lending must not be weakened in pursuit of private returns, he said. IDBI has 19,108 employees, including 9,500 from SC, ST and OBC categories, 6,911 women and 884 differently abled staff.

The deal

On October 14 the government approved the sale of a 60.72 per cent stake to Fairfax for about Rs 53,000 crore (USD 5.5 billion). It would be the largest foreign investment in an Indian bank. Fairfax, led by Canadian billionaire Prem Watsa, will pay Rs 81 per share. Two independent valuation agencies set the benchmark fair value at Rs 75.99.

Fairfax would buy the government's 30.48 per cent stake, valued at about Rs 26,620 crore, and the 30.24 per cent held by LIC, valued at about Rs 26,440 crore. Before the sale the government holds 45.48 per cent of IDBI and LIC holds 49.24 per cent. The transaction is expected to close by the end of the current financial year, subject to clearance from the Reserve Bank of India.

Source: The Economic Times