Jairam Ramesh, Congress General Secretary in charge of Communications, has raised serious concerns over the Indian government's decision to sell a majority stake in IDBI Bank to Fairfax Financial Holdings of Canada. The deal, approved on October 14, involves a 60.72% stake sold for approximately ₹53,000 crore ($5.5 billion), marking the largest foreign investment in an Indian bank.
Ramesh, during a press conference, highlighted findings from a Businessworld investigation that suggest potential conflicts of interest and lack of transparency in the transaction. He questioned the rationale behind selling an institution with a historic legacy and a profit of nearly ₹10,000 crore in the last financial year.
Established on July 1, 1964, IDBI Bank was envisioned by then-Finance Minister T. T. Krishnamachari to support India's industrial development. It played a crucial role in establishing key financial institutions like SIDBI, EXIM Bank, NSE, SEBI, and NSDL. Ramesh questioned the justification for selling such a significant institution to a foreign entity.
Central to Ramesh's concerns is the role of Gurumoorthy Mahalingam, an independent director at LIC, who simultaneously served on the boards of both LIC and Fairfax-controlled Thomas Cook India for seven months. During this period, LIC began the process of selling its 30.24% stake in IDBI, while Fairfax was a bidder for the bank. Ramesh argued that Mahalingam's dual role presents a clear conflict of interest, as he was also a member of LIC's Investment Committee.
Ramesh criticized the government's vague explanations, which he claimed failed to address the conflict of interest concerns or the future of IDBI's employees. He also questioned the urgency behind selling a public sector bank that had returned to profitability.
Key Questions Raised
Ramesh posed several questions to the Modi government regarding the transparency and accountability of its major deals. He asked why such concerns arise with every significant transaction under the current administration. He questioned who is making decisions in these deals, whose interests are being protected, and whether there is a thorough investigation into potential conflicts of interest.
- Why was the minimum share price of IDBI initially set at ₹94.42 and then reduced to ₹75.99, resulting in a sale nearly ₹8,800 crore below the government's own valuation?
- On what basis and under which rules was the minimum price changed on the day Fairfax's bid was opened? Did those setting the new price know Fairfax's bid in advance?
- Why was a LIC director simultaneously serving on the board of a Fairfax-controlled company during the IDBI sale process? Additionally, why were ten former government and regulatory officials appointed to Fairfax group companies after the sale process began?
Ramesh emphasized the need for justice not only to be done but to be seen to be done. He argued that without transparent answers to these questions, the fairness of the process remains in doubt.
