Canada's Fairfax Financial, a frontrunner to acquire the government's stake in IDBI Bank, is set to be allowed up to two years to consolidate its India bank holdings to smooth the acquisition, according to sources familiar with the matter. The transaction, valued at more than $5 billion, would be the largest foreign investment in an Indian bank. A third source, a government official, said it would be 'speculative' to say that Fairfax will be given two years to consolidate its bank holdings, as reported by Reuters.
The long-delayed sale of a majority stake in IDBI Bank, held by the federal government and state insurer Life Insurance Corp of India, is in its final stages. The deal has already been cleared by a panel of senior bureaucrats and is now before a committee of ministers for final approval. The transaction would require regulatory clearances from the Reserve Bank of India and the Securities and Exchange Board of India. Last month, India received revised bids from Fairfax and Emirates for the IDBI stake after lowering the reserve price for the sale, as reported by Reuters.
Under Reserve Bank of India rules, an entity cannot own and operate two separate banks. Fairfax owns about 40% of smaller lender CSB Bank, which has business worth ₹86,282 crore ($9 billion). The Canadian investor is likely to be given up to two years to either sell its stake in CSB Bank or merge it with IDBI Bank. IDBI Bank has assets of nearly $42 billion, significantly larger than CSB Bank's operations. One option to comply with RBI regulations would be to merge CSB Bank with IDBI Bank, as reported by Reuters.
Fairfax's India entity is also exploring a sale of its entire CSB stake, according to sources. The discussions remain at an early stage and a final decision will be taken only after negotiations with the government are completed. Fairfax may favour selling its CSB holding because a merger could involve complications, including labour union-related issues, and CSB is too small to significantly alter the combined entity's profile. The finance ministry and RBI did not respond to requests for comment, as reported by Reuters.
Fairfax has been a major investor in India through Fairfax India Holdings Corporation, which had assets worth $3.8 billion as of June 30, 2026. Its other investments include non-bank lender IIFL Capital and online brokerage firm 5paisa. The deal's importance for the government comes at a time when the Middle East war has strained finances and weaker foreign inflows have pressured the rupee, according to Reuters.
