Former Secretary to the Government of India E A S Sarma has escalated his opposition to the proposed IDBI Bank divestment, calling it "prima facie illegal" and a breach of parliamentary assurances. According to The Hindu BusinessLine, Sarma has written to the Finance Minister about the "ill-conceived" proposal, citing two serious legal concerns about the disinvestment. The first relates to several highly valuable land assets acquired under the 1894 land acquisition Act for public purpose, which would revert to the government if IDBI becomes private. The second concern involves Section 5(1) of the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003, which implicitly provides that service conditions of employees cannot be altered. Sarma notes that the bank currently holds more than 90% equity with the Centre and LIC, making it a public sector entity subject to SC/ST/OBC reservations and welfare mandates under the Directive Principles.
The most significant legal challenge stems from the December 8, 2003 parliamentary assurance by the then Finance Minister that the government would maintain not less than 51% equity holding in IDBI Bank as a banking company. As reported by The Hindu BusinessLine, this assurance was recorded by the Government Committee on Assurances and constitutes a breach of parliamentary assurance by the current government's disinvestment decision. Sarma also questions why neither the bank nor its shareholders are aware of DIPAM's proposal, noting that small shareholders should have been taken into confidence. The forum emphasizes that this is not merely a commercial transaction but concerns ownership and control of one of the country's strategically important financial institutions.
The proposed divestment threatens welfare mandates and employee rights that have been established over decades of public sector operation. According to The Hindu BusinessLine, the bank currently employs 3,070 SC, 1,214 ST, 5,604 OBC, 805 EWS employees, along with 6,911 women employees and 884 differently abled employees. Sarma warns that privatisation would end interest subvention for KCC loans to farmers since March 2019, when the bank was reclassified as private by RBI. The metro and urban branches have already stopped providing interest subvention for KCC loans to farmers, and semi-urban and rural branches are likely to follow if the bank becomes private. The forum argues that financial sovereignty constitutes an essential pillar of national sovereignty, with the banking system mobilising hard-earned savings of millions of citizens for national development.
The disinvestment process faces significant regulatory challenges due to lack of competition and conflict of interest concerns. As reported by The Hindu BusinessLine, Fairfax faces a conflict of interest as it has acquired majority share in Catholic Syrian Bank, making it the only contender for IDBI. The RBI's established policy not to permit the same promoter to control two banks at the same time means the deal would be "ab initio invalid" due to clear conflict of interest. Sarma criticizes DIPAM's exclusion of Central PSEs from bidding while not excluding entities controlled by foreign governments, calling it discriminatory and resulting in questionable outcomes. The forum calls for good sense to prevail on the Finance Ministry and for the government to drop the proposal once for all in favor of strengthening IDBI Bank's role as a development finance institution.
The forum has called upon the Government of India to immediately place the complete proposal relating to the strategic sale of IDBI Bank in the public domain and review the decision in light of India's long-term financial and economic sovereignty. The demands include honoring assurances made before Parliament during IDBI's restructuring, ensuring comprehensive parliamentary discussion before any irreversible decision is taken, and protecting the interests of employees, depositors, customers and the wider national economy. Sarma appeals to all Members of Parliament, State Legislatures, constitutional authorities, economists, jurists, trade unions, banking experts and every citizen committed to constitutional values and national self-reliance to participate in a broad national debate before any final decision is implemented. The forum emphasizes that the proposed strategic sale also raises issues concerning the Directive Principles of State Policy and warrants careful examination through democratic processes.
