Demand for Scrapping IDBI Disinvestment
Conflict of Interest in the deal should be investigated
Sarma’s Letter to Finance Minister Nirmala
I demand scrapping of IDBI disinvestment forthwith Order an independent judicial enquiry into the conflict of interest on multiple fronts and on the manner in which the government is handing over IDBI’s valuable assets to Fairfax for nothing in return.
From:
E A S Sarma
Former Secretary to the Government of India
To
Smt Nirmala Sitharaman
Union Finance Minister;
Dear Smt Sitharaman,
Please refer to my letter of 31-10-2026 expressing my concerns at the government imprudently disinvesting it’s and LIC’s equity shares in IDBI in favour of Fairfax and, that too, at a price that did not fully capture the true value of IDBI (https://countercurrents.org/2026/10/e-a-s-sarma-calls-for-scrapping-idbi-stake-sale-to-fairfax-demands-independent-enquiry/). In addition, I had also refefrred to the recent Business World revelations (https://www.businessworld.in/article/sensational-details-of-idbi-fairfax-deal-first-they-saw-the-bid-then-they-set-the-price-631066 & https://www.businessworld.in/article/lic-director-sat-on-fairfax-co-s-board-while-lic-was-selling-idbi-to-fairfax-631373) on the fallacious justification put forward by DIPAM to conclude the sale hastily and the conflict of interest involving a Director of LIC sitting on the Board of a Fairfax subsidiary.
Evidently, DIPAM has not exercised due diligence in ensuring that the disinvestment process is free from all possible conflicts of interest. KPMG is the Transaction Advisor assisting DIPAM on IDBI disinvestment and has evidently advised the Department on IDBI’s valuation. KPMG has also been closely associated on several fronts with IIFL Capital, a firm in which Fairfax had a substantial equity share. The relationship between IIFL Capital and KPMG India seems to span several key corporate dimensions.
In particular, KPMG has been offering non-audit services to IIFL Capital over the last three years (https://www.bseindia.com/XBRLFILES/BRSRPDFUploadDocument/BRSR_542773_17082026172457.pdf & https://www.bseindia.com/xml-data/corpfiling/attachhis/cbc302fa-d76b-49c4-8237-3f2ed6efecb0.pdf).
While the IDBI disinvestment process was going on, Fairfax had indicated its intention to enhance its equity share in IIFL Capital to 51%. Fairfax has since invested Rs 2000 crores to acquire such control over IIFL Capital https://economictimes.indiatimes.com/industry/banking/finance/fairfax-india-to-raise-stake-in-iifl-capital-to-51-with-211-million- investment/articleshow/130879119.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst)
I am not sure whether KPMG and Fairfax have disclosed their dealings with each other to DIPAM. The latest Business World findings are equally disturbing (https://www.businessworld.in/article/is-fairfax-buying-idbi-with-idbi-s-own-money-631521). Is Fairfax buying IDBI equity by bringing in FDI? It may not be the case as Fairfax is reported to have clarified, “So the way it works is there’s excess capital at IDBI Bank. And so they’ll just pay cash… we see them paying cash at the time of the deal at market prices… cash on hand, dividends from our insurance companies, potential asset sales… and the contributions of Digit and IIFL Capital at their respective market prices.”
It is true that IDBI’s Capital Adequacy Ratio as 30-6-2026 is 26.92%, as against the normative level of 11.5%. If what Fairfax contends is to be conceded, its excess capital would be used by Fairfax to pay cash to itself for buying in Digital Insurance and IIFL capital, at their market prices. The rest of the disinvestment proceeds would then come from the very transaction of IDBI disinvestment that the CCEA had approved. This shows how fallacious is the government’s argument that the sale of equity in IDBI would get “additional fiscal resources”. This is typically a case in which the government is handing over a valuable public asset to a foreign company in return for nothing, calling for an impartial enquiry.
In my letter of 31-10-2026, I showed how, by using convoluted arguments, the government has sought to justify selling 30.48% of its own equity and 30.24% of LIC’s equity for an amount far below the intrinsic value of that equity. In principle, it is imprudent on the part of the government to disinvest CPSEs and financial institutions like IDBI, as such public sector undertakings have a crucial role to play, as envisaged in the Constitution. I once again caution the government not to proceed with the sale of IDBI equity and demand that an independent enquiry be instituted to evaluate the propriety and prudence of it, so that the findings from such an enquiry may be placed before the Parliament for a discussion.
Regards,
Yours sincerely,
E A S Sarma
Visakhapatnam, 14-40-4/1 Gokhale Road, Maharanipeta,
Visakhapatnam 530002
Mobile: 91-9866021646
Email: eassarma@gmail.com
2-11-2026
Website: http://eassarma.in
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