Canadian company Fairfax Financial, one of the bidders for the government's stake in IDBI Bank, may be granted up to two years to consolidate its assets in India to simplify the purchase process, sources familiar with the matter reported.
The sale of the controlling stake in IDBI Bank, owned by the federal government and the state insurer Life Insurance Corp of India, is in its final stages. This deal, valued at over $5 billion, would be the largest foreign investment in an Indian bank. It is also important for the government amid financial strain caused by the Middle East war and the weakening rupee due to reduced foreign inflows.
According to Reserve Bank of India (RBI) regulations, one entity cannot own and manage two different banks. Fairfax owns approximately 40% of the smaller lender CSB Bank. It is anticipated that the Canadian investor will be given up to two years to either sell its stake in CSB Bank or merge it with IDBI Bank, sources stated.
However, one source, a government official, noted that it would be 'speculative' to claim that Fairfax would receive two years to consolidate banking assets. Fairfax, the Ministry of Finance, and the RBI did not respond to requests for comment.
Last month, India received revised bids from Fairfax and Emirates for a stake in IDBI after the reserve price for the sale was lowered. Sources indicated that the deal has already been approved by a group of senior bureaucrats and is now under consideration by the cabinet committee for final approval. Regulatory clearances from the RBI and the Securities and Exchange Board of India will follow.
Two possible options
One way to comply with RBI rules is to merge CSB Bank with IDBI Bank. Nevertheless, one source mentioned that the Indian entity Fairfax is also exploring the possibility of fully divesting its stake in CSB.
CSB, based in the southern state of Kerala, has a business volume of 86,282 crore rupees ($9 billion). Fairfax acquired control of this lender in 2018 when it required new capital to overcome financial difficulties. IDBI Bank has assets worth nearly $42 billion.
Fairfax might prefer to sell its stake in CSB, as a merger could entail complexities, including union-related issues. Furthermore, the source added that CSB is too small to significantly alter the profile of the merged entity. Discussions remain in early stages, and a final decision will only be made after negotiations with the government are concluded.
Fairfax is a major investor in India through Fairfax India Holdings Corporation, which had assets of $3.8 billion as of June 30, 2026. Its other investments include the non-banking lender IIFL Capital and the online brokerage firm 5paisa.