IDBI Bank Sale Row: Sitharaman Accuses Congress Of Political Lending, Defends Fairfax Deal

Finance Minister Nirmala Sitharaman has defended the proposed sale of IDBI Bank to Canada's Fairfax Financial Holdings, accusing the Congress-led government of allowing political influence to shape lending decisions and leaving the lender saddled with bad loans. Her remarks came in response to Congress leader Rahul Gandhi's criticism of the disinvestment and his concerns over the future of the bank's employees and depositors.

The government approved the sale of a 60.72 per cent stake in IDBI Bank for around Rs 53,000 crore on October 14. Gandhi has questioned the rationale for selling the lender, arguing that public sector banks serve a broader purpose than generating proceeds through disinvestment.

What Sitharaman Said To Rahul Gandhi

In a post on X, Sitharaman said IDBI Bank had been forced under previous administrations to lend to large business groups with close links to Congress leaders. She named Videocon, Winsome, ABG Shipyard and Kingfisher, saying loans to these businesses had turned into bad assets and caused substantial losses for the bank.

The Finance Minister said the Narendra Modi-led NDA government had worked to revive the lender through professional management, prudent lending and recapitalisation exceeding Rs 25,000 crore. She added that the bank was now positioned for its next phase of growth and maintained that the strategic restructuring process had followed due procedure.

Sitharaman also challenged Gandhi's credibility by referring to his allegations concerning the Rafale deal. She said his claims in that case had been exposed and that he had been required to apologise.

Finance Minister Cites 1976 Removal Of SBI Chairman

Sitharaman's criticism extended beyond IDBI Bank to the Congress party's record in the banking sector. She alleged that banks and financial institutions had been treated as personal entities by the previous government, with influential borrowers receiving favourable treatment while bank employees faced pressure to approve loans.

As an example, she cited the removal of State Bank of India chairman R K Talwar in 1976, during Indira Gandhi's tenure. Sitharaman alleged that Talwar was removed after resisting political pressure to relax lending norms for a company associated with Sanjay Gandhi.

She argued that the Congress-era system favoured powerful borrowers through personal connections, contrasting it with what she described as a banking system in which ordinary customers have easier access to loans and employees are no longer pressured to approve lending decisions over telephone calls.

Rahul Gandhi Questions Sale Of A Public Sector Bank

Gandhi has opposed the IDBI Bank disinvestment and expressed support for its employees.

In a letter to the bank's employees, he recalled meeting a group of staff members at Parliament House in March last year. According to Gandhi, they questioned why the government wanted to sell a bank they had helped make profitable.

He said he subsequently raised the issue in the Lok Sabha, asking why the government was selling the lender and what safeguards would protect its employees and depositors. Gandhi alleged that the government had not provided a satisfactory explanation before deciding to sell the bank to Fairfax.

The Congress leader maintained that public sector banks should be treated as institutions that contribute to nation-building rather than assets to be sold.

Fairfax To Acquire Government And LIC Stakes Worth Rs 53,000 Crore

The proposed transaction involves the combined sale of stakes held by the government and the Life Insurance Corporation of India (LIC).

Fairfax Financial Holdings will acquire the government's 30.48 per cent stake, valued at around Rs 26,620 crore, and LIC's 30.24 per cent stake, worth approximately Rs 26,440 crore. Together, the holdings account for 60.72 per cent of IDBI Bank.

The transaction, valued at about Rs 53,000 crore ($5.5 billion), is expected to rank among the largest foreign investments in an Indian bank and represents a major step in the government's long-delayed banking privatisation drive.

The strategic sale is expected to be completed by the end of the current financial year, subject to regulatory clearance from the Reserve Bank of India (RBI).