According to bank unions, the Cabinet’s approval for the strategic disinvestment of the government’s stake in IDBI Bank and the transfer of management control to a strategic buyer is a step backward.
“The decision to disinvest in a bleak scenario would result in underselling and passing the benefits on to private investors. It may also result in the whitewashing of bad loans from the balance sheet,” wrote S Nagarajan, GenSec of the AIBOA (All India Bank Officers’ Association), in a letter to the President of India, Prime Minister, RBI Governor, and IDBI Bank and LIC Chiefs.
Fears of rationalization among employees
Nagarajan feared that investor profiteering would lead to the closure of branches/offices, the restriction of banking activities, staff rationalization, and adverse staff service conditions, all of which would be counter-productive to the entire workforce.
“This announcement coming from power corridors is shocking and disturbing in an emergency of health in the country,” he said. Nagarajan emphasized that IDBI Bank had recently turned the corner due to the workforce’s efforts combined with the management’s approach to separating certain ancillary activities.
“The structural change implemented by the government in 2004 by converting IDBI (a development financial institution/DFI) into IDBI Bank (a universal bank) was unquestionably a mistake…the government’s decision to sell its stake in IDBI Bank is unquestionably a backward step… In addition, the government’s promotion of an Infra Bank with substantial capital is certainly intriguing,” Nagarajan said.
Appeal to the President
The Association urged the President, as Custodian of Public Sector Undertakings and Public Wealth, to advise the authorities to halt the move to divest the government’s and LIC’s stake in the bank.
Furthermore, AIBOA requested immediate intervention to begin steps to recover bad loans (worth 36,212 crores as of March 31, 2021) promptly, lest corporate defaulters acquire this great time-tested institution.
“IDBI played a leading role in financing industrial development in our country,” said CH Venkatachalam, General Secretary of the All India Bank Employees’ Association. IDBI Bank encountered difficulties due to some private corporate houses defrauding the bank by failing to repay loans.”
On Thursday, IDBI Bank’s shares closed 6.72 percent higher at 40.50 per share. During the day, the bank’s stock rose nearly 15% to 43.50.