Cabinet approves Rs 52,878 crore sale of IDBI Bank stake to Fairfax Financial, Canada

The Union Cabinet on Wednesday approved the sale of a 60.72% stake in IDBI Bank to Canada-based Fairfax Financial Holdings for Rs 52,878 crore, in what is expected to be the largest foreign direct investment in India’s financial sector.

The transaction is expected to be completed by March 2027.

“It is not a disinvestment, but a restructuring,” Finance Minister Nirmala Sitharaman said. “This is because the government will remain invested in IDBI Bank.”

Fairfax, backed by Indian-Canadian billionaire Prem Watsa, won the bid at Rs 81 per share, above the closing price of Rs 70.38 on the last trading day before the invitation of final bids on May 18.

IDBI Bank shares rose 6.9% on Wednesday to close at Rs 89.85 on the National Stock Exchange.

The sale proceeds will contribute to the Centre’s disinvestment target for 2026-27. The government has raised Rs 55,757 crore against its budget target of Rs 80,000 crore, according to the Department of Investment and Public Asset Management.

Before the transaction, Life Insurance Corporation of India (LIC) held 49.24% of IDBI Bank, while the Centre held 45.48%. After the sale, their stakes will fall to around 19% and 15%, respectively.

Fairfax will be required to retain the bank’s name for three years after the deal is completed. Its capital investment will be locked in for five years. It must also reduce its stake in IDBI Bank to 26% over 15 years, with the timeline to be agreed upon with the Reserve Bank of India (RBI).

Fairfax also owns a 40% stake in Kerala-based CSB Bank through its subsidiary FIH Mauritius Investments Ltd. Since the same promoter cannot own two banks, Fairfax must decide within two years whether to merge the banks or reduce its stake in CSB Bank.

CSB Bank shares rose 5.5% on Wednesday to Rs 325.

LIC will have to reduce its stake in IDBI Bank from around 19% to 15% within two years of the transaction’s completion. The finance ministry said the government could sell its remaining stake through the open market under the prescribed procedure.