The Cabinet Committee on Economic Affairs under the Ministry of Finance on October 14, approved the sale of a controlling 60.72 per cent stake in IDBI Bank to a subsidiary of Fairfax Financial Holdings, for approximately ₹52,878 crore. The deal, once complete, may not immediately bring any change to customers’ deposit balances or account terms.
Under the approved transaction, the government will sell a 30.48 per cent stake and LIC a 30.24 per cent stake, leaving them with holdings of 15 per cent and 19 per cent, respectively. The prospective buyer will still have to present its credentials to RBI and submit a roadmap for complying with the prescribed regulatory conditions.
IDBI's proposed change in ownership does not directly cancel your existing savings accounts, current accounts of fixed deposits. IDBI remains an RBI-regulated bank.
IDBI is insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC), which will continue to protect deposits up to ₹5 lakh. That is, if the bank shuts down, the DICGC is expected to cover up to ₹5 lakh in eligible savings, current, fixed and recurring deposits. However, this amount includes the total principal and interest earned. For multiple deposits at the same bank, the amount is calculated after adding them together.
The new owner might adjust interest rates on new deposits or renewals in the future as part of the bank’s new business strategy. But the rates on old deposits will be subject to the terms discussed at the time.
Floating-interest rates will change, but they are based on applicable benchmarks, not the ownership change.
The bank’s name, digital applications, internet banking, business style and product offerings might also change gradually. However, the government has not announced any immediate changes that affect customers.
Customers should also be wary of unsolicited messages claiming that the ownership change requires them to update account details, transfer money or disclose passwords. Re-check whether they are official bank communications.
Why is the government selling its stake in the IDBI Bank?
The finance ministry explained that post-privatisation, the IDBI Bank is expected to generate funds without government assistance.
However, Bloomberg reported that the IDBI stake is expected to provide the Indian government with some fiscal relief against rising crude prices.
As per the latest data from the Department of Investment and Public Asset Management (DIPAM), the Centre has raised ₹55,757 crore via disinvestments. The Centre will exceed its disinvestment target of ₹80,000 crore when the IDBI deal is completed.
