Canadian firm Fairfax Financial Holdings' proposed $5.5 billion takeover of IDBI Bank is facing opposition from employees and political parties over the lender's valuation and the government's stake-sale process.
On October 14, the Indian government approved the sale of a 60.72% stake in IDBI Bank to Fairfax Financial Holdings for about 530 billion rupees ($5.59 billion), the largest foreign investment in the country's banking sector.
As part of the deal, the government and Life Insurance Corporation of India (LIC) agreed to sell a little over 60% stake in the lender to Fairfax.
The United Forum of IDBI Officers and Employees (UFIOE) continued its nationwide strike against the sale for a second day on Tuesday, urging the government to halt it.
Union representatives have argued that authorities have taken inconsistent positions on IDBI Bank's status during the sale process.
"When it comes to regulation and court rulings, IDBI Bank is treated as a private sector bank. But for valuation purposes, it is being compared with public sector banks," said Devidas Tuljapurkar, convenor of UFIOE, questioning the methodology used to determine the lender's value.
In India, government-owned banks tend to trade at lower valuations than private lenders.
The union has urged the government to withdraw the privatisation plan and instead retain majority ownership by increasing its stake above 51%, while safeguarding public investment and employee interests.
The proposed sale has also drawn political criticism.
Last week, Leader of Opposition Rahul Gandhi backed protesting employees and opposed transferring control of the bank to Fairfax.
In a statement, Gandhi said: "Public banks are not assets to be sold off, they are tools to build the nation."
Finance Minister Nirmala Sitharaman defended the government's decision, saying IDBI Bank had been left financially weak after years of lending to large corporate groups during previous administrations. She added that it was finally revived through “professionalism, prudence" and recapitalization of more than 250 billion rupees.
Adding to pressure on the government, the Unorganised Workers and Employees Congress, a labour wing of the opposition Congress Party, wrote to Finance Minister Nirmala Sitharaman on Monday, seeking an independent investigation into the IDBI Bank stake sale and warning of legal action if its demand was not met.
Last week, local media reported that government officials had understated IDBI Bank's valuation to make Fairfax's offer appear more attractive. The finance ministry rejected the allegation, saying the Core Group of Secretaries on Disinvestment reviewed the valuation methodology.
Reuters could not independently verify the report or establish whether any deviations from the prescribed process had occurred.
Emails to Fairfax and the finance ministry went unanswered.