Bizz Buzz Bureau Visakhapatnam

Thedecision to sell away a majority stake in restructured IDBI Bank after it achieved a turnaround is counter-productive paving the way for deviating from implementing the nation's financial inclusion programmes, a prominent trade union leader has said.

All India Insurance Employees' Association (AIIEA) general secretary Sreekant Mishra told Bizz Buzz that it (the decision) does not make any sense to hand it over on a platter to Canada-based Fairfax Financial Holdings, saying the bank was put on a profitable path after the taxpayers and LIC absorbed the losses drastically reducing the gross non-performing assets (NPA). The disinvestment will dilute welfare mandates by the Government of India.

Decrying the recent decision by the Cabinet Committee on Economic Affairs (CCEA) to sell 60.72 per cent of the combined equity stake held by the Government of India and the LIC in IDBI Bank to Fairfax Financial Holdings for Rs52,878 crore, he said the stakes being sold comprises 30.48 per cent held by the Government of India and 30.24 per cent by LIC.

Once the deal is completed against public outcry, the Government of India and LIC will retain only 15 per cent and 19 per cent equity stakes in the bank, respectively.

The AIIEA leader described the decision as unfortunate as IDBI Bank has been registering consistent profitability and demonstrated significant improvement across key financial and operational parameters. The proposed privatisation also raises serious questions about the government’s commitment to its earlier assurance to Parliament. In 2003, the then Finance Minister of India had assured Parliament that the “government shall at all times maintain not less than 51 per cent equity holding in IDBI as a banking company”. The proposed sale represents a clear departure from the spirit of that assurance, he remarked.

"The decision also appears to be driven by the government’s determination to meet its disinvestment target of Rs80,000 crore for the current financial year, rather than by any compelling economic or institutional necessity. The transfer of majority ownership of a strategically important bank to a foreign financial entity is also difficult to reconcile with the ruling party’s repeated assertion of economic nationalism," he said.

According to Mishra, AIIEA firmly believes that there is no compelling reason for LIC to reduce its stake in IDBI Bank through such a sale. LIC could have continued as a major shareholder, strengthening the existing partnership between the two institutions and leveraging the potential of bancassurance. Several major banks have successfully combined their banking operations with insurance businesses through subsidiary arrangements. Instead of exploring such possibilities, the government has chosen to facilitate the transfer of control of a public sector bank to private ownership. This decision is part of the government’s wider agenda of privatising public sector enterprises and financial institutions, with potentially serious consequences for the interests of ordinary customers, employees and the economy.

He said AIIEA is strongly committed to throw its weight behind the struggle of the IDBI Bank officers and employees and called upon the government to drop the proposal of privatising IDBI Bank in the interest of the customers, the economy and the people at large.