IDBI Bank sale: DIPAM failed to exercise due diligence, charges EAS Sarma

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Is Fairfax buying IDBI equity by bringing in FDI, wonders EAS Sarma, former secretary to government, and a trenchant critic of the deal. It may not be the case, as clarified by the proposed buyer, he notes.

By Vinson Kurian

Updated - November 02, 2026 at 09:05 PM.

Relationship between IIFL Capital and KPMG India seems to span several key corporate dimensions. In particular, KPMG has been offering non-audit services to it over the last three years, Sarma pointed out, citing Bombay Stock Exchange filings. | Photo Credit: REUTERS/ADNAN ABIDI

Revelations in IDBI Bank disinvestment are raising even more suspicions than have already transpired, with the Department of Investment and Public Asset Management (DIPAM) having allegedly failed “to exercise due diligence in ensuring that the process is free from all possible conflicts of interest. “

Is Fairfax buying IDBI equity by bringing in FDI, wonders EAS Sarma, former secretary to government, and a trenchant critic of the deal. It may not be the case as clarified by proposed buyer Canada-based Fairfax, he said in the latest in a series of letters addressed to Union Finance Minister, and shared with businessline.

Transaction Adviser

He mentioned that KPMG is the Transaction Advisor to DIPAM on disinvestment, and has evidently advised it on IDBI’s valuation, too. It may be recalled that the leading accounting and professional services firm has also been closely associated on several fronts with IIFL Capital, a firm in which Fairfax has a substantial equity share.

Relationship between IIFL Capital and KPMG India seems to span several key corporate dimensions. In particular, KPMG has been offering non-audit services to it over the last three years, Sarma pointed out, citing Bombay Stock Exchange filings. He also quoted media report suggesting that, while the IDBI disinvestment process was going on, Fairfax had indicated its intention to enhance its equity share in IIFL Capital to 51 per cent.

Interest in IIFL Capital

Fairfax has reportedly invested ₹2,000 crore to acquire such control over IIFL Capital. “I am not sure whether KPMG and Fairfax have disclosed their dealings with each other to DIPAM. In particular, KPMG has been offering non-audit services to IIFL Capital over the last three years,” Sarma pointed out.

Fairfax has reportedly stated as follows: ”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.”

Use of excess capital

IDBI’s Capital Adequacy Ratio as on June 30, 2026, is 26.92 per cent, as against the normative level of 11.5 per cent. If what Fairfax contends is to be conceded, excess capital would be used to pay cash to itself for buying in Digital Insurance and IIFL capital at market prices. Rest of disinvestment proceeds would come from the very transaction of IDBI disinvestment that the Cabinet Committee on Economic Affairs (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, Sarma said in the letter.

Far below intrinsic value

He reiterated that using convoluted arguments, the government has sought to justify selling 30.48 per cent of its own equity and 30.24 per cent of LIC’s equity for an amount far below the intrinsic value. In principle, it is imprudent on its part 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 may be placed before the Parliament for a discussion,” Sarma said in the letter to the Finance Minister.

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Published on November 2, 2026

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