The Cabinet Committee on Economic Affairs has approved the sale of a 60.72 percent controlling stake in IDBI Bank to a subsidiary of Canada-based Fairfax Financial Holdings for Rs 52,878.08 crore, or Rs 81 a share, according to Millennium Post and Kotak Neo. The government will sell 30.48 percent and the Life Insurance Corporation 30.24 percent, and the price is above the fair value of Rs 75.99 a share set by two independent valuers, a premium of about 6.6 percent. It is described as the largest foreign investment in an Indian bank. The sale needs approvals from the Reserve Bank of India and the Competition Commission of India, and completion is targeted before the end of 2026-27, with March 2027 given as the date.
The argument that the deal is good for the bank and the government rests on price, buyer and conditions. Before the deal, the government held 45.48 percent and LIC 49.24 percent, a combined 94.71 percent, so the sale ends a long period of state ownership. Finance Minister Nirmala Sitharaman said the government was enabling the bank's next phase of growth through foreign direct investment while retaining a minority stake. The conditions protect continuity: Fairfax must keep the IDBI Bank name for at least three years and accept a five-year promoter lock-in. The government will raise about Rs 26,620 crore and LIC about Rs 26,440 crore, according to Millennium Post, and IDBI's shares rose more than 8 percent on the day, which shows that investors welcomed the news.
The argument for caution is that the deal is not done and the history is troubled. The sale process began in 2022, and the first bids from Fairfax and Emirates NBD in February 2026 came in below the government's reserve price, so a revised offer was needed. Approvals from the Reserve Bank and the Competition Commission are still pending, and a share purchase agreement must be signed. Fairfax has a 15-year timeline to bring its holding below the 26 percent cap that applies to private bank promoters, and LIC must cut its stake from 19 percent to 15 percent within two years. Critics of foreign control of a bank with millions of depositors will ask what happens if the owner's priorities change, while supporters note that the regulator's approval is the safeguard.
The sale matters for Indian banking as a major step in privatising a state-controlled lender and bringing in foreign capital, at a time when the government is trying to reduce its role in running banks. For depositors and employees, the conditions on the bank's name give some continuity. For the budget, the Rs 26,620 crore the government raises is a useful source of cash, and LIC, which sells 30.24 percent of the bank, will be left with about 19 percent that it must cut to 15 percent within two years.
The price is above independent valuation and the terms are cautious, but approvals and a signed agreement are still to come. March 2027 will show whether the government has found a lasting way out of IDBI.
Featured image: An IDBI Bank branch in Paravur, Kerala (file photo). Photo: Arunvrparavur, CC BY-SA 3.0, via Wikimedia Commons.
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