Former Finance Secretary Subhash Chandra Garg calls IDBI Bank Sale a Big Scam

Former Finance Secretary Subhash Chandra Garg has sharply criticized the sale of IDBI Bank to Fairfax Financial Holdings, calling it a “black chapter” and a “scam” in India’s public asset disinvestment history.

Key Criticisms by Subhash Garg

Predesigned Sale & Lack of Competition: Garg argued that the privatisation process was structured as a “single horse race” designed to favor a single buyer (Fairfax Financial Holdings) rather than fostering genuine competitive bidding.

Undervaluations: He stated that the bank was sold at an “atrociously low” price (₹81 per share, totaling ₹52,878 crore for a 60.72% combined stake from the government and LIC), claiming that a truly competitive process should have yielded at least double the realized value.

Conflict of Interest: Garg pointed to a conflict of interest in how former high-ranking bureaucrats were hired as advisors by Fairfax Financial Holdings, which ultimately won the bid.

Midway Methodology Changes: He alleged that altering the bidding and evaluation methodology midway reduced market competition instead of expanding it.

Government’s Defense (DIPAM)

Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla defended the transaction, noting:

No Reserve Price Alteration: Chawla clarified that the reserve price was not arbitrarily refixed down; rather, after initial bids, qualified bidders were asked to improve their offers to maximize value for the government and LIC.

No Viable Alternative: The Cabinet Group of Secretaries on Disinvestment chose to invite improved bids rather than scrapping the process, as transaction advisors warned that finding another buyer willing to commit ~₹52,000 crore in cash would be “very, very remote”.

Status of the Deal: While approved by the Union Cabinet on October 14, 2026, the transaction is still subject to final regulatory clearance and source-of-funds verification by the Reserve Bank of India (RBI).

How controversy started?

The controversy surrounding the ₹52,878 crore sale of a 60.72% stake in IDBI Bank to Canada-based Fairfax Financial Holdings (via its subsidiary 10955230 Canada Inc.) centers on an investigative leak detailing how the bidding process unfolded.

A leaked 10-page internal note from the Core Group of Secretaries on Disinvestment (dated August 13, 2026) revealed that the transaction rules were heavily modified mid-process to ensure the deal went through.

Independent valuation agencies initially calculated a strict reserve floor price of ₹94.42 per share. When the final sealed financial bids were opened, Fairfax Financial Holdings only offered ₹75 per share, failing to meet the minimum reserve requirement. Instead of scrapping the auction due to the failed bids, the government invoked an unconventional rule.

• The Scrap Analogy: Officials justified changing the rules midway by drawing from the Railway Stores Code for auctioning physical scrap assets, which allows a depot officer to accept bids lower than the reserve price if “found expedient”.
• The Price Tweak: The government abandoned the initial ₹94.42 target and ordered fresh valuations using a different methodology. This established a new, lower “fair-value benchmark” of ₹75.99 per share.
• The Final Ultimatum: Fairfax raised its offer to ₹81 per share and issued an ultimatum that it would completely withdraw if the price wasn’t accepted. The government accepted, framing the ₹81 price as a “success” because it technically beat the newly engineered ₹75.99 benchmark. Critics point out that IDBI stock had recently touched market highs of ₹118.45.

Former Finance Secretary Subhash Chandra Garg and opposition parties claim the privatization was engineered as a single-buyer race. While two financial bids were originally received, the second bidder—whose identity remains confidential—was disqualified by the Ministry of Home Affairs due to security clearance issues. This left Fairfax as the sole remaining bidder, stripping the process of competitive market dynamics.

The leaked internal document explicitly notes why the government felt compelled to push the deal through despite the broken reserve price. The Committee of Secretaries cited severe fiscal stress on the Union government resulting from high global energy prices, an under-strain currency, and sluggish Foreign Direct Investment (FDI) inflows. The transaction advisors warned that finding another buyer willing to shell out over ₹52,000 crore in cash would be “very, very remote,” prompting the government to take what it could get.