The government has clarified on the process of strategic restructuring of IDBI Bank, explaining that the first or initial bid round was conducted in the financial year 2025-26 by DIPAM as per its internal practices, which are indicative guidelines and not "hidebound" rules or regulations.
In a press release on Thursday, October 29, the Ministry of Finance said, "The foreword itself states that the procedure suggested is not to be construed as a rigid, legal framework, which may require due adaptation/ modification in the best interest of successful execution of the transaction in a time bound manner. Given the complex nature of strategic transactions, the indicative guidelines give flexibility to ensure cost and time spent in lengthy processes is not wasted."
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The clarification comes weeks after the Union Cabinet approved the strategic stake sale of IDBI Bank to Canada Inc. whose parent company is Fairfax Financial Holdings for Rs 52,878 crore. Finance Minister Nirmala Sitharaman described the transaction as a “strategic restructuring” rather than strategic disinvestment, noting that the government and Life Insurance Corporation of India (LIC) will continue to hold stakes in the lender.
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The Ministry stressed that in a press note issued on October 14, 2026 it had mentioned that there is "no a-priori benchmark" for bidding. The bidders conduct own valuation and submit bids confidentially and independent agencies are hired for fair valuation of the enterprises, which is further used as a measure to evaluate the reasonableness of the bids submitted. The price determined through bidding may be either higher or lower than the comparative valuation.
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To address this, the provision of "ex-ante" is included in Para 5.3.6(iii) of the Request for Proposal, which states, “In the event the Financial Bid of the Highest Bidder is lower than the reserve price, the Gol will decide the further course of action and the QIPs shall not subsequently question any decision taken by the Gol in this regard.”
According to the governemnt, there is no procedure prescribed to handle this situation internally within DIPAM and special powers have been delegated to the Core Group of Secretaries on Disinvestment (CGD) by the Cabinet Committee of Economic Affairs (CCEA) for this purpose.
In a meeting on August 16, 2017, when the decision on the note titled ‘Procedure and Mechanism for Strategic Disinvestment - Delegation Thereof' was approved, the CCEA permitted the CGD to remove all concerns, including deviations from procedure, to ensure effective implementation of the strategic disinvestment transactions approved by the CCEA. The decisions states, “8.1 Approval of the CCEA is solicited in case of strategic disinvestment...(ii) for empowering the CGD to take policy decisions with regard to procedural issues and to consider deviations as necessary from time to time for (the) effective implementation of decisions of CCEA."
While exercising these powers, the procedure for the second or the best offer round was determined by the CGD. "The reserve price was neither decreased, nor increased, and the first round itself became functus officio after the initial bids were not approved," the governemnt said.
The ministry further clarified that the valuation methodology was reviewed by the CGD in April, 2026 before invitation of best bids. The ministry said, "Since the comparator used for valuation has to be contemporaneous with the bids received, and 31st March, 2026 closing financial accounts were released in the public domain in end-April, the independent valuation agencies had started working on the revised valuations in May, 2026 itself."
It added, "The process remained double blind because the bidder did not know the valuation and the valuators did not see the bids. It is only the CGD which gets to see a complete picture and compares the bids with fair valuations to take a final call on the reasonableness of the bids submitted."
Additonally, the government emphasised that the valuation was conducted by two different advisers, who were independent of each other, with the help of independent and distinct methodologies. The Business Valuation is always done through the Transaction Adviser according to the protocol, who appointed professional experts trained in the Market Multiple Method due to the complex nature of this transaction.
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Notably, the Market Multiple method is of two sub-types, namely the Comparable Company Method and the Comparable Transaction Method. As suitable comparable transaction were not available, comparable companies' method was used, which were all the listed public sector banks in IDBI Bank's case. The lender was a government owned banking company till 2019, but became a government ‘controlled' banking company after the LIC acquired majority stake. As there is no specific regulatory protocol for this case, the RBI began treating it as a private bank only for regulatory concerns, even htough the ownership was with the LIC and the government, and the market investors continued to view it as a public sector entity.
As per the government, the Asset Valuer also utilised strong and time-tested methodologies, including additional value for disputed tax demands, which were indemnified as a common demand of the qualified bidders to nudge the bid offer upwards. "This remains a low probability event and revenue neutral for the government, as only the additional tax demand, if paid at all, will be eligible for reimbursement. The potential liability that could arise on this account was only Rs. 627 crores while the bid discovered price increased by Rs 3,917 crores enhancing the value of the transaction for the GoI and the LIC," the Ministry said,
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