New Delhi: The government broke its own rules while the bidding process for IDBI Bank was underway earlier this year, says a report published in Business World on Thursday, October 29. The report, headlined “Sweet deal: Fairfax Buys IDBI Cheap, Dumps Its Own Firms In at Full Price”, cites internal minutes of the Core Group of Secretaries on Disinvestment (CGD), which met on August 13. The minutes reveal that the government simply decided not to follow the rules.Instead, the CGD appears to have picked Prem Watsa-owned Canadian Fairfax Financial Holdings as the successful bidder for just under 61% of IDBI through a circuitous and unusual path.The BW report, by Palak Shah, reveals the efforts made by the Indian government to ensure the Prem Watsa–owned Fairfax could secure the company at a price he was willing to pay – Rs 52,878 crore, at Rs 81 per share – that was far below valuers’ initial assessments of the share value IDBI could command in such a sale.The report also says the undeclared motives behind the sale – to help the Union government tide over a stressed-out financial situation. To the public, the government only announced the Fairfax–IDBI deal as the biggest Foreign Direct Investment (FDI) opportunity in a long time.The bank’s employees have now sought a parliamentary review of the move and an immediate suspension of the process, adding on to the ongoing protests since the stake-sale came on the anvil. The sale involves LIC giving up over 30% of its shareholding and the government of India selling its own rougly 30% to the foreign company.The Finance Ministry’s Department of Investment and Public Asset Management (DIPAM) department has no denied the contents of the note in the earlier BW report, as per the publication’s follow up, published Friday, October 30. DIPAM has sought to argue that the government’s procedures “are in the nature of indicative guidelines and not hidebound rules or regulations”, reports BW.The matter has also drawn political attention, with Congress party MP and Leader of Opposition Rahul Gandhi backing the employees and accusing the Union government of price-fixing in the stake sale of a company raised during his party’s government.“IDBI was established during Congress’s time to build the nation’s industry. During Modi’s time, first the bidding was seen, then the price was set,” he wrote on X on Friday. He shared a letter offering IDBI employees support.Norms violated, but openly, and in writingThe norm during bidding is for government officials who fix the reserve price, the lowest price at which it is willing to sell any asset, to have no knowledge about what bidders are willing to offer. For this reason, the financial bids are reviewed only after the reserve price has been fixed.In the case of IDBI, Fairfax ended up purchasing IDBI Bank despite offering less than the reserve price. It and another bidder still in the race for IDBI initially refused to revise their offers. The CGD then met twice, on April 2 and 27, and asked the valuation agencies to review their earlier price recommendation, reports BW.On June 1, Fairfax did offfer a revised bid, the Rs 81 per share offer that was approved. Subsequently, the CGD met twice on one day – July 13 – opening this bid, ranking it first (H-1 or the highest bidder) and then ordering the agencies to come up with new valuations.Exactly a month later, the new agencies’ valuations arrived and the Fairfax bid was found to be “reasonable” against them by the CGD.Also read: Crony Footprints All Over IDBI Bank SaleAt first, the valuers had settled on a minimum price of Rs 94.42 a share for IDBI. The BW report cites a previous Business Standard report that had said that Fairfax’s first bid was Rs 75, which is significantly below this initial valuation.However, the new benchmark set by the valuers in their second estimation was Rs 75.99. Now the price was just about one rupee above Fairfax’s initial bid, says the BW report.The bridge from Rs 94.42 to Rs 75.99 could be crossed only because, as BW reports, the CGD sent the meeting of its meeting to both the valuation agencies. Not just that, a note accompanying the minutes said that the valuers must “take suitable action” – which can only mean that they should approach the price Fairfax had offered in their estimates.The government was not even supposed to know what the bids were, forget sharing it with the valuers.Rationales randomised and sorted to make the transaction happenBut there was more, BW has revealed:When the share price of IDBI rose, it was seen to swing “too much”, and in its note, the CGD instructed the valuers to ignore it altogether. When the share price fell, the same note expressed a different sentiment – since the market price was “consistently below the discovered bid price for three months…one view was that the H-1 Bid Offer may be accepted as a fair outcome.”“One valuation priced IDBI by comparing it with other banks. The CGD ordered that only public sector banks be used. The note itself speaks of the ‘very high market price of the private sector banks’,” said the note, as per BW.The government also refused to value IDBI at its market price.“Including the private sector banks in the pool of comparators, leads to an over-estimated reserve price,” said the note, as per the BW report. It also says that if the Reserve Bank of India (RBI) regards IDBI itself as a private bank, that was just a technicality, and private banks should not be the basis to assess its share value.Note that IDBI is being sold to a private entity.Then, a day after the sale was approved, Fairfax chairman Prem Watsa said Fairfax’s own stakes in Go Digit and IIFL Capital would move into IDBI “at their respective market prices.”Reason for sale? ‘Extraordinary fiscal strain’Typically, when the government is selling an asset to the private sector, it is supposed to raise money to fund other economically or socially useful activities – this is one of the usual primary justifications for disinvestment. However, in the case of IDBI’s sale, the government was not looking to do either, but make up its “extraordinary fiscal strain”, the note reviewed by BW says.As per the BW report, citing the Department of Economic Affairs, the note says that the year 2026 had “witnessed extraordinary fiscal strain due to the impact of the Middle East [West Asia] Conflict”. Thereafter, the note lists the damage: Higher fertiliser and LPG costs, excise cuts on petrol and diesel “resulting in substantial revenue loss”, “foreign exchange reserves have diminished and the rupee also has been under pressure”.It also says that this sale would “alleviate fiscal stress” and that the cash “would be important in a year when the budget arithmetic will be strained”.Also read: Rs 3.08 Lakh Crore Foreign Portfolio Investments Fled From India So Far in 2026So was the Fairfax–IDBI deal the biggest FDI ever or a distress sale? Taxpayers can decide! After all, the note cited by BW also has the government generously taking on the burden of future tax liabilities, absolving Fairfax.This decision to sell IDBI to Fairfax liability-free means that the Indian taxpayer would take on the burden of paying any fines or fees from pending litigation. Alternatively, the government might simply refuse to pay the taxpayer, should the liabilities arise in the future, says BW, citing the contents of the same note.In the note responding to the story, the Finance Ministry pegs the tax liability at (potentially) Rs 672 crore – but does not reveal what the government has committed to cover.Security flags, or no security flags?BW has also revealed that KPMG India was the Transaction Adviser, or the firm hired to run the sale. It produced the valuation that compared IDBI with public sector banks. BDO Valuation Advisory LLP was the Asset Valuer. It valued IDBI’s assets.In addition, one of the bidders, not named in the note, raised certain security “flags”, a common but serious occurence in government-led deals, which were ultimately cleared, but that bidder did not feature in the note. Two earlier bidders had been approved to participate in the bidding process, but did not.Meanwhile, the Economic Times reports that IDBI bank employees held a national convention on the privatisation in the national capital, in which Devidas Tuljapurkar, convenor of the United Forum of IDBI Officers and Employees, said that they are “seriously concerned that the transaction may undervalue IDBI’s properties, institutional capabilities, customer relationships, future earnings and strategic importance.”