The Cabinet Committee on Economic Affairs has approved the sale of a 60.72% equity stake in IDBI Bank Ltd to Fairfax Financial Holdings Ltd (through its subsidiary 10955230 Canada Inc.) for Rs 52,878 crore. This strategic restructuring marks the largest foreign direct investment in India’s financial sector. The Government of India and Life Insurance Corporation of India (LIC) will together transfer their combined 60.72% shareholding to the Canadian buyer, while retaining minority stakes of 15% and 19% respectively.
IDBI Bank is a scheduled commercial bank that faced serious financial difficulties over the past decade, requiring repeated capital infusions from the government and LIC. The Reserve Bank of India placed it under the Prompt Corrective Action Framework in 2017 due to high non-performing assets and mounting losses. After gradual improvement, RBI lifted these restrictions in March 2021, creating the conditions for this strategic sale.
Key facts
- Equity stake being sold: 60.72% (Government 30.48%, LIC 30.24%)
- Purchase price: Rs 52,878.08 crores
- Per share valuation: Rs 81 per share (winning bid), compared to benchmark price of Rs 75.99
- Strategic buyer: Fairfax Financial Holdings Ltd (Canadian company)
- Government residual stake after sale: 15%
- LIC residual stake after sale: 19%
- Cabinet approval date: 14 October 2026
- Expression of Interest issued: 7 October 2022
- Initial bids invited: Financial year 2025-26
- Final bids invited: Financial year 2026-27
Why the restructuring was necessary
IDBI Bank had deteriorated financially over several years, accumulating significant losses and non-performing assets (loans that borrowers had stopped repaying). The RBI’s Prompt Corrective Action Framework imposed restrictions on the bank’s operations and lending activities in May 2017, preventing it from expanding or taking on new business risks. Though the bank’s health improved sufficiently for RBI to remove restrictions in 2021, the government and LIC recognised that a strategic buyer with fresh capital and management expertise was needed to transform the bank’s operations and restore it to profitability.
The bidding and valuation process
The government conducted a two-stage, competitive bidding process managed through multiple oversight layers including an Inter-Ministerial Group, Core Group of Secretaries on Disinvestment, and an Alternative Mechanism of cabinet ministers. Potential bidders had to meet strict criteria: they required Reserve Bank approval under its “Fit and Proper” assessment and security clearance from the Ministry of Home Affairs.
Five parties initially expressed interest. Only four met the eligibility criteria, and ultimately two qualified bidders submitted technical and financial offers. Initial bids fell below the reserve price of Rs 94.42 per share set in January 2026, so they were rejected. Fairfax submitted a fresh bid of Rs 81 per share in May 2026.
To determine if this bid was reasonable, the government engaged two independent valuation agencies using different methodologies. One used “Relative Valuation by Market Multiple Method,” comparing IDBI Bank’s financial metrics against other public sector banks’ financial statements as of 31 March 2026. The other used “Asset Valuation Method,” assessing both tangible and intangible assets and liabilities. The average of these two independent valuations came to Rs 75.99 per share. Since Fairfax’s bid of Rs 81 per share exceeded this benchmark, it was approved as reasonable.
What changes for the bank and its stakeholders
Fairfax Financial Holdings will become the dominant shareholder and gain management control of IDBI Bank. The Canadian investment firm must present its credentials to the Reserve Bank under the same Fit and Proper Assessment process and commit to a regulatory compliance roadmap. The government will retain 15% ownership, allowing it to maintain a minority stake in the bank, while LIC retains 19%. The government plans to eventually sell its remaining 15% stake through open market sales following a standard procedure delegated to the Alternative Mechanism.
What this means for you
If you are an IDBI Bank customer, depositor or borrower, the bank’s operations will continue without immediate change. However, Fairfax’s takeover may lead to changes in lending policies, interest rates, service standards, or branch networks over time as the new owner implements its business strategy. IDBI Bank employees may face restructuring or redeployment decisions under new management. Existing shareholders holding IDBI stock will see their stakes diluted, but the share price reflects the transaction value approved by the Cabinet.
This transaction also signals the government’s willingness to hand over troubled public sector banks to foreign strategic investors capable of turnaround operations, rather than continuing to prop them up with taxpayer money.
What happens next
Fairfax Financial Holdings must complete the Reserve Bank’s Fit and Proper Assessment, obtain necessary regulatory approvals, and fulfill other closing conditions before the sale is completed. The government will then begin selling its residual 15% stake through open market transactions according to a standard operating procedure. LIC will manage its remaining 19% shareholding under its own internal procedures while complying with insurance sector regulations.