Sitharaman Hits Back at Rahul Gandhi Over IDBI Bank Sale, Says Congress-Era Banking Favoured the Powerful
Union Finance Minister Nirmala Sitharaman has hit back at Congress leader Rahul Gandhi over the proposed sale of a majority stake in IDBI Bank, accusing previous Congress-led governments of allowing political influence to shape lending decisions in public-sector banks.
In a post on social media platform X on October 30, Sitharaman described the banking system under earlier Congress governments as one that had a “phonebook for the powerful and a rulebook for the common citizens”. She alleged that political connections had influenced lending decisions and that bank employees had faced pressure to extend loans to influential individuals and business groups.
Her remarks came after Rahul Gandhi, the Leader of the Opposition in the Lok Sabha, criticised the government's decision to sell a controlling stake in IDBI Bank to a subsidiary of Canada's Fairfax Financial Holdings.
Sitharaman Accuses Congress of Political Interference in Banking
In her response, Sitharaman referred to several historical episodes that she said illustrated political interference in India's banking system.
She cited the 1957 Haridas Mundhra controversy involving investments by the Life Insurance Corporation of India (LIC), the removal of State Bank of India chairman R.K. Talwar in 1976, and alleged political pressure over lending to businesses associated with influential individuals.
She also referred to alleged pressure on banks during the 1980s and the United Progressive Alliance (UPA) period.
The Finance Minister specifically named companies including Videocon, Winsome, ABG Shipyard and Kingfisher while discussing IDBI Bank's earlier bad loans. She alleged that the lender had been compelled to extend loans to large business groups with connections to Congress leaders, resulting in substantial losses when those loans turned bad.
These are allegations made by the Finance Minister as part of the political exchange and should be distinguished from independently established findings about individual lending decisions.
Finance Minister Says IDBI Bank Was Revived With Over ₹25,000 Crore
Defending the NDA government's record, Sitharaman said IDBI Bank was handed over to the current administration in a poor financial condition.
According to her, the government worked to improve the bank's financial position through professional management, prudent lending practices and recapitalisation of more than ₹25,000 crore.
She maintained that the institution had made significant progress and was now ready for its next phase of growth.
Sitharaman also defended the proposed strategic restructuring, saying that the government had followed the required procedures.
The Finance Minister's response came amid criticism of the bank's proposed privatisation, with opposition leaders and employee representatives questioning whether the sale was necessary after the lender's financial recovery.
Rahul Gandhi Questions the Decision to Sell IDBI Bank
Rahul Gandhi has opposed the proposed stake sale and expressed support for IDBI Bank employees who have raised concerns about the transaction.
In a letter addressed to the bank's employees, Gandhi questioned why the government was selling a lender that had returned to profitability. He credited the employees for the bank's recovery and argued that public-sector banks play an important role in supporting the country's industrial and economic development.
He also raised concerns about the possible impact of private ownership on employees' service conditions and existing protections, including reservation provisions for Scheduled Castes, Scheduled Tribes and Other Backward Classes.
Gandhi referred to the government's earlier assurance of retaining a minimum 51% ownership in IDBI Bank and questioned the shift towards transferring control to a private investor.
His criticism reflects the Congress party's position that public-sector banks should continue to serve broader development objectives rather than be treated primarily as assets for disinvestment.
IDBI Bank Stake Sale: What Is the Proposed Deal?
The Union Cabinet approved Fairfax Financial Holdings' subsidiary, 10955230 Canada Inc., as the strategic buyer for IDBI Bank on October 14, 2026.
The proposed transaction involves the sale of a combined 60.72% stake for approximately ₹52,878 crore.
The shareholding proposed to be sold is divided as follows:
- Central government: 30.48%
- Life Insurance Corporation of India: 30.24%
Following the proposed transaction, the government's stake in IDBI Bank is expected to fall to 15%, while LIC's holding will reduce to 19%.
The deal would transfer management control to the strategic buyer, subject to the necessary regulatory approvals and completion of the transaction.
The proposed sale has become a major point of debate because it involves both the government's disinvestment policy and the future of a bank in which public institutions currently hold a substantial combined stake.
Finance Ministry Defends Valuation and Bidding Process
The political dispute has also coincided with questions about the valuation and bidding procedure followed for the transaction.
In a clarification issued on October 29, the Finance Ministry defended the process and said the reserve price had neither been increased nor reduced during the subsequent bidding round.
The ministry said the Core Group of Secretaries on Disinvestment had determined the procedure for the best-offer round under its delegated powers. It also stated that the second round helped increase the bid-discovered price by ₹3,917 crore.
The government has maintained that independent agencies were involved in the valuation exercise and that the process followed the applicable disinvestment framework.
However, the valuation and terms of the proposed transaction have continued to attract scrutiny, including questions raised in media reports about the methodology used to determine the bank's value.
A Wider Debate Over Public-Sector Banking
The exchange between Sitharaman and Gandhi highlights a broader disagreement over the role of public-sector banks in India's economy.
The government has defended strategic disinvestment as a way to bring in private investment, management expertise and technology while allowing public institutions to retain minority stakes.
The Congress, meanwhile, has questioned the decision to transfer control of a bank that it says has recovered financially and raised concerns about the consequences for employees and public ownership.
The proposed IDBI Bank transaction is therefore not just a dispute over the sale price. It has also brought attention to the questions of public accountability, bank employees' protections, the government's role in financial institutions and the future structure of India's banking sector.
The transaction will have to proceed through the applicable regulatory and legal requirements before the change in ownership and management can be completed.
For now, Sitharaman's remarks and Gandhi's opposition have turned the proposed IDBI Bank sale into a fresh political flashpoint between the BJP-led government and the Congress.
Sources: Moneycontrol, The News Minute and The Economic Times.
