Canada's Fairfax Financial Holdings will acquire a 60.72 per cent stake in IDBI Bank for about Rs 53,000 crore (USD 5.5 billion), in what would be the largest foreign investment in an Indian bank and a major milestone in the country's long-delayed banking privatisation drive.
The Cabinet Committee on Economic Affairs approved Fairfax subsidiary M/s 10955230 Canada Inc as the strategic buyer for the government's 30.48 per cent stake (for about Rs 26,620 crore) and state-run Life Insurance Corporation of India's (LIC) 30.24 per cent stake (for about Rs 26,440 crore).
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.
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 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.
As per 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 5 years for the promoter.
Also, Fairfax, which currently holds a 40 per cent stake in Kerala-based CSB Bank, will have to either merge with IDBI or exit the South India-based lender.
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.
Post completion of the transaction, which is likely before the end of FY27, the government will exit from the IDBI Bank board.
This is the largest foreign investment in an Indian bank to date. It outstrips the other marquee foreign bank deals of the past year.
Emirates NBD's purchase of a 60 per cent stake in RBL Bank was valued at USD 3 billion. It also tops MUFG Bank's acquisition of a 20 per cent stake in Shriram Finance for Rs 39,618 crore, described as the largest cross-border investment in India's financial-services sector, by roughly Rs 13,000 crore.
It is well ahead of Sumitomo Mitsui's USD 2 billion deal for Fullerton India Credit and PayU's USD 4.7 billion purchase of BillDesk, the largest financial-services deal of its period.
The deal would be a watershed moment for India's banking sector, providing a potential template for the privatisation of other state-owned lenders, where government ownership remains dominant.
It would also test investor appetite for acquiring control of a large Indian bank amid stringent regulatory requirements and the complexities of managing a financial institution.
The government, however, is calling the stake sale a "strategic restructuring", saying that the Centre and LIC will continue to hold 34 per cent together in the lender.
The sale would follow the Tata Group's acquisition of Air India, which was completed in January 2022. In October 2021, Tata won the bid for the national carrier with an offer of Rs 18,000 crore, comprising Rs 2,700 crore in cash and the assumption of Rs 15,300 crore of debt.
The CCEA nod draws curtains on a nine-year-long process. The process has faced hurdles over valuation. Initial bids submitted by Fairfax and Emirates NBD in February 2026 fell below the government's undisclosed reserve price, prompting the sale to be put on hold before the bidding process was revived. The revised offers were considered by the cabinet committee.