Cabinet clears historic IDBI Bank privatisation, Fairfax to take charge in Rs 52,878-cr deal

The Cabinet Committee on Economic Affairs has approved the sale of a 60.72 per cent stake in IDBI Bank to Fairfax Financial Holdings for Rs 52,878 crore. This is the country’s biggest strategic disinvestment since the sale of Air India and potentially opens a new chapter in the privatisation of state-controlled banks.

The proposed sale of a combined 60.72 per cent stake held by the government and Life Insurance Corporation of India (LIC) would transfer control of the lender to Fairfax, subject to the completion of the transaction and requisite regulatory approvals.

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Fairfax is a Canadian diversified financial holding company headquartered in Toronto.

Five-year process ends

The decision by the Cabinet Committee on Economic Affairs (CCEA), headed by Prime Minister Narendra Modi, on Wednesday (October 14) brought to a close a process that has stretched over five years, marking a significant step in the government’s efforts to reduce its ownership of state-run assets and attract private capital into the financial sector.

“Once completed, this will be the largest FDI in the financial sector of our economy so far,” the government said in a statement.

Information and Broadcasting Minister Ashwini Vaishnaw also briefed the media about the Cabinet decision on the IDBI Bank’s strategic restructuring. He said the government and LIC will together hold a 34 per cent stake in the restructured entity.

IDBI shares soar

Canadian billionaire Prem Watsa-led Fairfax will pay Rs 81 per share, higher than the benchmark fair value of Rs 75.99 determined by two independent valuation agencies, an official statement said.

The deal—the largest in the banking space—marks a major milestone in a long-delayed effort to privatise IDBI Bank and reduce state ownership of commercial enterprises. The sale process began in 2022 and faced a setback earlier this year when initial bids fell below the government's reserve price.

IDBI Bank shares on Wednesday rose 9.07 per cent to close at Rs 90.44 per share on BSE after the announcement.

FM calls sale a milestone

Finance Minister Nirmala Sitharaman termed the transaction a “milestone”, saying “having supported the bank’s recovery, we are now enabling its next phase of growth through the infusion of Foreign Direct Investment while retaining a minority stake”.

“This will not only strengthen the banking ecosystem but also help banking services surpass global benchmarks. It reinforces that India’s growth story is strong, its economy is resilient, and the government's commitment to reform is unwavering,” she added.

The CSB case

“The CCEA ...approved M/s 10955230 Canada Inc (parent entity M/s Fairfax Financial Holdings Ltd) as the strategic buyer for this transaction for a purchase consideration of Rs 52,877.07 crore for the acquisition of 60.72 per cent stake in IDBI Bank, comprising 30.48 per cent equity held by the GoI and 30.24 per cent by the LIC,” the statement said.

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Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla said the deal will be completed before the end of the current fiscal.

RBI approval required

The transaction still needs approval from the Reserve Bank of India (RBI), which will conduct a “fit and proper” assessment, as well as the Competition Commission of India (CCI) and other statutory authorities.

Fairfax must present its credentials to the RBI and submit a roadmap for meeting the regulator’s requirements before the sale can be finalised. It must also make an open offer to public shareholders, unless the requirement is waived by the capital markets regulator SEBI.

According to RBI norms, promoters can hold no more than 26 per cent in a bank. Fairfax will get up to 15 years to comply with this condition, Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla said, adding that there will be a lock-in period of five years for the promoter.

Employees 'need not worry'

The new promoter will also have to retain the name, brand and customer relations for at least three years, he said. On employees, Chawla said they don’t have to worry, and management transfer has been discussed with all stakeholders.

LIC will also have to cut its stake from 19 per cent in IDBI Bank to 15 per cent in two years. After the completion of the transaction, which is likely before the end of FY27, the government will exit from the IDBI Bank board.

Also, Fairfax, which holds a stake in the Kerala-based CSB Bank, will have to either merge it with IDBI Bank or exit the holding within two years. It will also have to make an open offer to the minority shareholders.

Timeline

Here is a timeline of the nine-year journey that culminated in the sale of the government’s holding in IDBI Bank to Fairfax:

May 2017: RBI places IDBI Bank under the Prompt Corrective Action (PCA) framework after the lender breaches thresholds for capital adequacy, asset quality, return on assets and leverage. Its net non-performing assets exceeded 13 per cent in March 2017.

January 2019: LIC acquires a 51 per cent controlling stake in IDBI Bank. The RBI subsequently classifies the lender as a private-sector bank for regulatory purposes.

March 2021: The RBI removes IDBI Bank from the PCA framework after nearly four years, citing an improvement in its financial performance.

April 2021: LIC approves a proposal to reduce its stake in IDBI Bank through equity dilution alongside the government’s planned strategic disinvestment.

May 2021: The Cabinet Committee on Economic Affairs approves the strategic sale of the government’s and LIC’s stakes in IDBI Bank, including the transfer of management control.

October 2022: The government invites expressions of interest for the sale of a 60.72 per cent stake in IDBI Bank, comprising a 30.48 per cent holding by the government and 30.24 per cent by LIC.

January 2023: The government receives multiple expressions of interest from prospective bidders.

July 2024: Prospective bidders receive the required security clearances from the Home Ministry and undergo the RBI’s fit-and-proper assessment.

January 2026: The government invites financial bids for the proposed stake sale.

February 2026: The government receives financial bids from Fairfax Financial Holdings, led by Prem Watsa, and Dubai-based Emirates NBD.

March 2026: The government puts the sale process on hold after the financial bids fall below the reserve price.

April 2026: The government revives the disinvestment process and undertakes a technical evaluation of the way forward.

July 2026: The government invites revised financial bids and subsequently receives updated offers from Fairfax and Emirates NBD.

October 2026: CCEA approves strategic restructuring of IDBI Bank: Fairfax to acquire 60.72 per cent controlling stake for Rs 52,878 crore; government and LIC to together hold 34 per cent after the stake sale.

(With agency inputs)