Cabinet Clears ₹52,878-Crore Fairfax Bid for IDBI Bank, Largest-Ever FDI in India’s Financial Sector

The Union Cabinet’s approval of Fairfax Financial Holdings’ ₹52,878-crore bid for a 60.72% stake in IDBI Bank marks a major shift in India’s banking sector.

Under the deal approved on October 14, 2026, the government will sell 30.48% of IDBI Bank and LIC 30.24%. The buyer is 10955230 Canada Inc., a subsidiary of Fairfax Financial Holdings, which will gain management control subject to regulatory approvals. Its bid of ₹81 per share exceeds the government’s benchmark of ₹75.99. The government describes the transaction as the largest foreign direct investment in India’s financial sector.

IDBI Bank faced mounting bad loans and losses before being placed under the RBI’s Prompt Corrective Action framework in May 2017. The government approved LIC’s acquisition of control in 2018, completed in January 2019, when LIC bought 51%. The aim was to stabilise the bank while creating business synergies: IDBI branches could sell LIC policies, while the bank could benefit from LIC’s extensive agent network and cash-management services.

LIC subsequently increased its stake to 49.24%, while the government held 45.48% before the current sale. In May 2021, the government approved strategic disinvestment and transfer of management control. LIC agreed to dilute its holding, citing valuation, market conditions, regulatory requirements and policyholders’ interests.

IDBI Bank’s financial position has improved considerably. Its gross bad-loan ratio fell from nearly 32% in September 2018 to 2.3% by June 2026, according to Reuters. The bank had more than 2,000 branches and assets of approximately ₹4.44 lakh crore by June 2026. The recovery raises questions about whether the sale price adequately reflects its improved position. IDBI shares closed at ₹90.44 on October 14, above the bid price, although stock-market prices and strategic-sale valuations are not directly comparable.

Fairfax is a publicly traded Canadian insurance and investment holding company, founded in 1985 and led by V. Prem Watsa, an Indian-born investor who studied at IIT Madras before moving to Canada. Its businesses include property-and-casualty insurance, reinsurance and investment management. Fairfax reported US$4.77 billion in net earnings for 2025. Watsa controlled 43.3% of its voting power at the end of 2025, which does not mean he personally owns the entire company or the IDBI acquisition.

Fairfax already has interests in CSB Bank, IIFL Capital Services and 5paisa; Fairfax India Holdings also has a major investment in Bengaluru International Airport. Its approximately 40% CSB Bank stake creates a regulatory complication: Fairfax must resolve it within two years, either by divesting or pursuing a merger with IDBI, subject to approvals.

After the sale, the government and LIC are initially expected to retain 15% and 19%, respectively. However, LIC disclosed in 2025 that it must reduce its residual holding to 15% or below within two years of closing, with voting rights capped at 10% and no board nominee. The deal also envisages an open offer to eligible minority shareholders. Reports refer to a three-year lock-in for the buyer’s investment, and IDBI Bank is expected to retain its name.