The plan to sell IDBI Bank is heating up, and it might lead to a mandatory open offer. The Indian government and LIC want to sell a total stake of 60.72 per cent in the bank. Under SEBI rules (the stock market regulator), if someone buys more than 25 per cent of a company, they must offer to buy more shares from the public. This is called an 'open offer.' If Canada-based Fairfax Holdings buys the stake, they might have to offer to buy another 26 per cent from regular shareholders.

EAS Sarma, a former Secretary to the Government of India, has raised serious red flags about this deal. He says the price at which the bank is being sold is 'unconscionably low' (way too cheap). He even warned that the transaction could turn into a scam, similar to a past government sale that had to be cancelled in embarrassment. Sarma has written several letters to Finance Minister Nirmala Sitharaman asking the government to stop the sale.

One big problem is the rule about foreign ownership. RBI (Reserve Bank of India) rules usually say that foreign investors cannot own more than 49 per cent of a new private bank for the first five years. However, this deal involves selling over 60 per cent to a foreign entity. Furthermore, Fairfax already owns CSB Bank. In India, the RBI generally does not allow one promoter to control two different banks at the same time. This could make the whole deal invalid from the start.

Sarma also pointed out that IDBI Bank owns very expensive land and buildings in prime city locations. If the bank is sold to a private player, the value of this land should ideally go back to the government. He feels the current sale ignores the true value of these assets. He also noted that the government has stopped Indian public sector companies from bidding, which he calls unfair and discriminatory.

For bank officers, the biggest concern is job security. There are about 9,500 employees from reserved categories (SC/ST/OBC) and many women and differently-abled staff. Privatisation would end these reservations and welfare benefits. Sarma argues that a 2003 law protects the service conditions of IDBI employees, and this sale might violate those legal promises. He believes the government should strengthen the bank instead of selling it to fix its budget.

Bankers and customers should watch how the RBI and SEBI handle these objections. If the government ignores these warnings, the deal could face legal challenges in court. For now, the sale remains a sensitive issue involving thousands of employees and lakhs of LIC policyholders who indirectly own a piece of the bank.