Fairfax to pick 60.72% stake in IDBI Bank: Can the Canadian firm own 2 Indian lenders? What RBI rules say
Canadian billionaire Prem Watsa-led Fairfax Financial Holdings will acquire a 60.72% stake in IDBI Bank for approximately ₹53,000 crore ($5.5 billion), marking what would be the largest foreign investment in an Indian bank and a significant step in the government’s banking privatisation programme.
The Cabinet Committee on Economic Affairs (CCEA) has approved Fairfax subsidiary M/s 10955230 Canada Inc as the strategic buyer for the proposed acquisition. The transaction involves the government’s 30.48% stake in IDBI Bank, valued at approximately ₹26,620 crore, and a 30.24% stake held by state-owned Life Insurance Corporation of India (LIC), valued at around ₹26,440 crore.
The proposed sale is expected to reduce government ownership in the lender and advance the long-delayed privatisation process.
Fairfax’s existing stake in CSB Bank poses a regulatory question
Fairfax already holds a 40% stake in Kerala-based CSB Bank. Its proposed acquisition of a controlling interest in IDBI Bank raises questions about its ability to maintain substantial ownership in both lenders.
Under Reserve Bank of India (RBI) norms, promoters are generally permitted to hold up to 26% in a bank. Fairfax will therefore need to address the regulator’s requirements concerning its existing investment in CSB Bank and its proposed ownership of IDBI Bank.
The company may have to restructure its holdings, potentially through a merger or an exit from CSB Bank, depending on the regulatory assessment and the eventual conditions imposed by the authorities.
RBI, CCI approvals required to complete transaction
The acquisition is not yet finalised and remains subject to approvals from the RBI, the Competition Commission of India (CCI) and other statutory authorities.
The RBI will conduct a ‘fit and proper’ assessment of the proposed buyer. Fairfax will need to establish its credentials and submit a roadmap explaining how it intends to comply with the central bank’s regulatory requirements before the transaction can be completed.
The buyer will also be required to make an open offer to IDBI Bank’s public shareholders, unless the Securities and Exchange Board of India (Sebi) grants an applicable exemption.
Fairfax has offered ₹81 per share for the bank, above the benchmark fair value of ₹75.99 determined by two independent valuation agencies, according to an official statement.
IDBI Bank privatisation process began in 2022
The proposed transaction marks a major milestone in the government’s effort to privatise IDBI Bank and reduce state ownership in commercial enterprises.
The sale process began in 2022 but encountered delays. Earlier this year, the process suffered a setback after initial bids reportedly fell below the government’s reserve price.
The proposed acquisition by Fairfax would represent a major ownership transition for the lender, subject to the completion of regulatory formalities.
IDBI Bank shares surge 9% after announcement of deal
Shares of IDBI Bank rallied following the announcement of the proposed transaction. The stock rose 9.07% to close at ₹90.44 apiece on the BSE on Wednesday.
Union 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.
