Opposition Grows Against Privatisation of IDBI Bank

The Reserve Bank of India's(RBI) approval for the sale of over 51% of the shares of IDBI Bank has sparked significant backlash, with unions appealing to Parliament and top government officials to reconsider the move. Employees and officers associations are opposing the government's decision to privatise the Bank, citing concerns of customer interests and national interests.

Formal Approval from RBI

According to reports, the RBI has granted formal approval based on fit and proper criteria for the sale of 30.5% of the Government of India's shares and 30.2% of shares owned by the government-owned Life Insurance Corporation (LIC) in IDBI Bank. This means that the government is effectively selling off more than 51% of its shares, completing the privatisation process. Critics argue that this move is ill-advised and detrimental to both IDBI's customers and the national interest.

In a press release issued on 20 July 2024, the United Forum of IDBI Union appealed to the Parliament to stop the privatisation of IDBI to maintain the sanctity of the Parliament. The forum emphasised the importance of keeping IDBI under government control for the benefit of its customers and the country.

IDBI’s Unique History

Industrial Development Bank of India(IDBI) was established on 1 July 1964 as a subsidiary of the Reserve Bank of India. On 16 February 1976, ownership was transferred to the Government of India. For about four decades, IDBI functioned as a developmental financial institution. Following the recommendations of the Narasimham Committee and subsequent economic reforms, IDBI transformed into a commercial bank in 2004. At that time, the Finance Minister assured both Lok Sabha and Rajya Sabha that the government's share in IDBI would not fall below 51%.

(An excerpt obtained via RTI indicating the assurance given by the Ministry of Finance on 08 December, 2003, at the time of transformation of IDBI into a commercial bank.)

Changes During the Pandemic

Despite these assurances, during the pandemic, IDBI Bank amended its articles of association, enabling the government's share to be reduced below 51%. Without consulting Parliament, the government transferred 49.2% of its share to LIC. The latest reports indicate the government is planning to sell 30.5% of its share and 30.2% of LIC's share to private entities, potentially raising around ₹29,000 crore.

‘Absurd Reforms’

Critics argue that the government's approach is contradictory. While forming the National Bank for Financing Infrastructure and Development (NaBFID), a new developmental financial institution, the government simultaneously converted IDBI into a commercial bank and is now moving towards divestment of its shares below 51%, completely transferring the entity to the private sector. The critics claim this move betrays the Parliament and undermines previous assurances.

(The press statement from Maharashtra State Bank Employees Federation appealing the parliament to stop privatisation of IDBI bank.)

Appeal to Union Government

The United Forum of IDBI Unions has come forward appealing to the Prime Minister, the Finance Minister, the President of India, and all parliamentarians to uphold the assurance given to Parliament. The forum highlights that IDBI has reported impressive profits for three consecutive years, underscoring the bank's potential. They urge the government to reconsider its decision in the interest of IDBI's depositors, small borrowers, and the agricultural sector, which could be adversely affected by privatisation.

Devidas Tuljapurkar, President of the IDBI Bank Employees Association, General Secretary of the Maharashtra State Bank Employees Federation, and the All India Joint Secretary of All India Bank Employees’ Association(AIBEA) released a press statement emphasising the need to maintain government control over IDBI Bank. Earlier, the All India IDBI Officers’ Association had raised concerns about undue work pressure and a toxic work culture for bankers within IDBI Bank.