IDBI Bank Privatisation: Why Fairfax Bought It

From development bank to bank

IDBI was set up in 1964 under the IDBI Act, 1964, and was at first wholly owned by the Reserve Bank of India. The Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003 repealed that Act and turned the institution into a limited company, IDBI Ltd. In September 2004 the RBI recognised it as a scheduled bank.⁴

In 2005 the commercial banking arm, IDBI Bank, was merged into IDBI. In 2006 IDBI took over United Western Bank in a rescue, which raised its branch count from 195 to 425.⁴

The bad-loan crisis

A bank earns most of its money from loans, so when borrowers stop repaying, the bank has a problem. Loans that are no longer being repaid as agreed are called non-performing assets (NPAs), and the bank must set aside provisions against them, which cut into profit and capital.

Capital is the bank's own money, the cushion that absorbs losses before depositors or lenders are exposed. When losses eat into that cushion, a bank must raise new capital, slow its lending, or both. Because of that link, a rise in bad loans is a problem for the bank's owners long before it is a problem for its customers.

The bank's own figures show the scale. In FY19, the year to March 2019, IDBI Bank reported a standalone net loss of ₹15,116.30 crore² against total income of ₹25,371.53 crore.² Its gross NPA ratio was 27.47 percent, against 27.95 percent a year earlier, and its net NPA ratio fell to 10.11 percent from 16.69 percent.²

The standalone figure is the bank's own accounts without its subsidiaries. The consolidated figure includes the group's subsidiaries, and the gap between the two is small in FY19.²

The regulator had acted earlier. In May 2017 the RBI placed IDBI Bank under its Prompt Corrective Action (PCA) framework because of a surge in its non-performing assets and a negative return on assets. Under PCA the bank faced restrictions on its business, including curbs on lending and branch expansion.⁶

At 31 December 2016 the bank's net NPAs stood at ₹20,949 crore, or 9.61 percent of advances.⁶ We could not reconcile the return-on-assets figure for the same quarter across the sources we checked, so we leave it out.

The gross NPA ratio peaked at 31.78 percent in September 2018, when the net NPA ratio was 17.30 percent. Large corporate borrowers had defaulted after aggressive lending in the mid-to-late 2000s, and Kingfisher Airlines was among the prominent cases.⁷

Between 2010 and 2020 the government infused around ₹25,000 crore into the bank.⁷ The government's share of the 2019 infusion, ₹4,557 crore, falls inside that period.⁸

The chart shows selected years only. We leave out FY22 because two sources give different figures for March 2022, and we could not settle which is right. The FY20 and FY21 profit figures and the FY21 NPA ratio come from a Business Today report of May 2021.⁹

A bank with large losses has less capital to absorb the next shock, and less room to lend. That is the mechanism behind the PCA rules: the regulator limits what a weak bank can do until its capital and asset quality recover.

Two figures from the table need a short explanation. Gross NPAs are all the loans that are no longer being repaid as agreed. Net NPAs are the same figure after the provisions the bank has set aside, so the net ratio is always lower, and the gap between the two shows how much of the damage the bank had already booked.

Rescued by LIC and the state

LIC became the bank's controlling shareholder in January 2019. It completed the acquisition of a 51 percent controlling stake on 21 January 2019, with a total investment of ₹21,624 crore.²⁴

More capital followed. In September 2019 the Union Cabinet approved a one-time infusion of ₹9,300 crore. LIC's share was 51 percent, or ₹4,743 crore, and the government's share was 49 percent, or ₹4,557 crore.⁸

The bank was not the only public lender that needed help. Between FY17 and FY21 the government recapitalised public sector banks in India with ₹3,10,997 crore, of which ₹34,997 crore came from the budget and ₹2,76,000 crore through recapitalisation bonds, a Lok Sabha written reply by Minister of State for Finance Bhagwat Karad said.¹⁰

That scale matters for the IDBI Bank privatisation debate. Public money went into state-owned banks in large amounts, and whether that was the right use of the money is a question the later parts of this case study take up.

Why is IDBI Bank being privatised?

The intention to cut the government's stake in IDBI goes back to the Budget for 2016-17. In it, Finance Minister Arun Jaitley said: “Government will take it forward and also consider the option of reducing its stake to below 50 per cent.”¹¹ The Budget for 2021-22, presented on Monday 1 February 2021, announced that two public sector banks and one general insurance company would be privatised, besides IDBI Bank. The speech did not name the two banks.¹²

Money is the other reason on the record. The Centre had budgeted ₹80,000 crore from disinvestment and asset monetisation for FY27, and it had raised ₹62,124 crore by 10 September 2026. Of that, ₹55,757 crore came from disinvestment and ₹6,367 crore from asset monetisation.¹³

The government's share of the IDBI sale is expected to bring around ₹26,000 crore, and the same report says total receipts could rise to around ₹88,000 crore if the transaction closes within FY27.¹³ These are estimates. The receipts depend on the price and on the deal closing, and the sale has not closed.

The buyer must also pass the RBI's tests. Potential bidders received security clearance from the Home Ministry and underwent the RBI's fit-and-proper assessment in July 2024.¹⁴

Fit and proper is the RBI's test of whether a prospective investor is suitable to own a bank. The test is applied before a buyer can sign, so the RBI's approval is the step that decides whether a deal can proceed at all.

How the IDBI Bank stake sale worked

The formal process opened with expressions of interest. The government issued the Preliminary Information Memorandum on 7 October 2022, inviting interest in the 60.72 percent held by the government (30.48 percent) and LIC (30.24 percent).³ Five parties submitted expressions of interest, four qualified, and two submitted techno-financial bids.³

The Cabinet Committee on Economic Affairs had approved strategic disinvestment, including transfer of management control, in principle in May 2021.¹⁴ Financial bids were invited in January 2026, and Fairfax and Emirates NBD submitted financial offers in February 2026.¹⁴

The first round did not close the deal. The discovered bid of ₹75 per share fell short of the ₹94.42 reserve price, so the bids were rejected.¹⁵ The government paused the process in March 2026 after bids fell below the reserve price, and it revived the exercise in April 2026.¹⁴

The government invited revised best offers in May 2026.¹⁵ Both bidders submitted revised offers in July 2026.¹⁴ The benchmark was ₹75.99 per share, the average of two independent valuations.³ The valuations used March 2026 accounts and two methods: a market multiple method against public sector bank peers, and an asset valuation method.¹⁵

Two terms need explaining. A reserve price is the minimum a seller will accept, so bids below it are turned down. Transfer of management control means the buyer takes over how the bank is run, not just a share of its profits.

The CCEA's approval on 14 October 2026 covered the 60.72 percent stake, for ₹52,878.08 crore, according to Business Today. The winning bid of ₹81 per share was above the ₹75.99 benchmark.³

The service conditions will be fully protected.

— DIPAM Secretary Arunish Chawla

Business Today reported the remark on 16 October 2026.¹⁶

1. 2016-17 BudgetFinance Minister says the government will consider reducing its IDBI stake below 50 percentSource 11 (opens the source in a new tab)
2. 1 Feb 2021Budget 2021-22 announces privatisation of two public sector banks and one general insurer, besides IDBI BankSource 12 (opens the source in a new tab)
3. May 2021CCEA approves strategic disinvestment of IDBI Bank in principle, including transfer of management controlSource 14 (opens the source in a new tab)
4. 7 Oct 2022Preliminary Information Memorandum issued; expressions of interest invited for 60.72%Source 3 (opens the source in a new tab)
5. Jul 2024Potential bidders receive Home Ministry security clearance and the RBI's fit-and-proper assessmentSource 14 (opens the source in a new tab)
6. Jan 2026Government invites financial bidsSource 14 (opens the source in a new tab)
7. Feb 2026Fairfax and Emirates NBD submit financial offersSource 14 (opens the source in a new tab)
8. Mar 2026Process paused after bids fall below the reserve priceSource 14 (opens the source in a new tab)
9. Apr 2026Government revives the disinvestment exerciseSource 14 (opens the source in a new tab)
10. Jul 2026Revised financial bids invited and received from both biddersSource 14 (opens the source in a new tab)
11. 14 Oct 2026CCEA approves sale of 60.72% to Canada Inc for ₹52,878.08 croreSource 3 (opens the source in a new tab)
12. 31 Mar 2027Expected completion, subject to RBI approvalSource 5 (opens the source in a new tab)

Is IDBI Bank a private bank?

As of 24 October 2026, no. The government and LIC own IDBI Bank together, and the sale to Fairfax has not closed.⁴ On 14 October 2026 the CCEA approved the sale of 60.72 percent of the bank to Canada Inc, a Fairfax Financial Holdings company.³ The sale is expected to close by 31 March 2027, subject to RBI approval.⁵ After it, the government would hold 15 percent and LIC 19 percent.³

What the IDBI Bank privatisation still needs

The sale is conditional. Fairfax must give the RBI its technical documents and present its eligibility. The share purchase agreement is executed only after regulatory approval.⁵ After the agreement is signed, the buyer must make an open offer to minority shareholders.¹⁷

An open offer is an invitation to the other shareholders to sell their shares to the buyer on set terms, so that small holders are not left behind when control changes hands. The reporting we opened does not give the offer price, size or timing, so we cannot say what minority holders would receive.

LIC's stake is the other moving part. The regulator has directed LIC to bring its residual holding down from 19 percent to 15 percent after the divestment.¹⁷ Tribune reporting gives no deadline for that cut.⁵ Outlook Business reports two years under RBI norms, which we set out below.¹⁸

The same step adds about 4 percentage points to the public float, which the government says will be available to retail investors. On our calculation, public and other holders would then hold about 9.28 percent, up from about 5.28 percent.¹⁷

The government expects completion by 31 March 2027, subject to RBI approval. Business Today reports that the deal “would hopefully be closed” before the end of the current financial year, a hope rather than a firm date.⁵¹⁷

Taken together, the record shows an IDBI Bank privatisation that went through several rounds, a first round that did not clear the reserve price, and a second round that the government accepted. The sale is still subject to the RBI, the agreement, the open offer and LIC's cut, so the record can describe the decision but not yet its results.

What the bank unions argue against the IDBI Bank sale

The strongest case against the sale comes from the bank unions, and it is worth stating in full. The United Forum of Bank Unions (UFBU) groups seven unions and says it represents 90 percent of the banking workforce. Its members wore black badges on 16 October 2026, two days after the Cabinet approval of 14 October.¹⁹

The 2003 assurance is central to the argument against IDBI Bank privatisation. AIBOC's writer prints it as: “Government shall at all times maintain not less than 51% equity holding in IDBI as a Banking Company.” The writer attributes it to Finance Minister Jaswant Singh in Parliament in December 2003.²⁰ We could not open the parliamentary record, so we give the wording as the writer printed it and have not checked it against the official debate.

The finance ministry answers the 2003 point from the statute. It says that during the 2003 debate the government moved an amendment to restrict the dilution of its stake, and that the amendment was rejected and is not in the Act. On 17 December 2018 the Delhi High Court, in All India IDBI Officers' Association v. Union of India, said: “there is no ambiguity in the language of the IDBI Repeal Act, 2003 and there is no scope to read any provision into the said enactment which proscribes the government from reducing or divesting its stake in IDBI Ltd.”¹¹

The court also said that promissory estoppel could not be invoked to stop the government reducing its stake.¹¹ The unions' point concerns what was said in Parliament, while the ministry and the court point to what the Act contains.

The unions object to the buyer as well as the price. The UFBU said the deal “amounts not only to privatisation but also to ‘foreignisation’ of the bank.”²¹

Government talks about Atmanirbhar but this important bank with huge public savings is being sold to a foreign investor.

— United Forum of Bank Unions (UFBU), quoted by Business Today, 15 October 2026

The price is the second line of attack. The United Forum of IDBI Bank Officers and Employees said the public “deserves evidence that a national asset is not being transferred at a throwaway price.”¹⁹ The approval rests on a valuation. As Business Today reports (https://www.businesstoday.in/amp/latest/corporate/story/centre-approves-fairfax-financials-rs52878-crore-bid-for-60-72-stake-in-idbi-bank-561590-2026-10-14), the ₹81 winning bid is above the ₹75.99 fair value, the average of two independent valuations³. On our calculation, ₹81 is about 6.6 percent above ₹75.99.³

The government's answer, as the AIBOC piece reports it, is that IDBI's service conditions will not change. The same writer points to CSB Bank, which Fairfax already controls, as a warning about foreign ownership. We could not confirm the claims the writer makes about CSB's workforce from a source we opened, so we leave them out.²⁰

The strongest research on the other side is about public banking in general, not about this sale. Burgess and Pande, in the American Economic Review (https://ideas.repec.org/a/aea/aecrev/v95y2005i3p780-795.html), write that the rural branch expansion programme “significantly lowered rural poverty, and increased non-agricultural output.”²² The paper studies what opening branches in unbanked places did in the 1970s and 1980s. It does not test whether a bank that is already profitable should be sold in 2026, so we use it to show the best case for public banking, not to settle the sale.

Who paid for the recovery?

The AIBOC writer’s argument is about who carried the risk. The article describes LIC as India’s policyholders and says they paid ₹21,624 crore for 51 percent of the bank in January 2019.²⁰ It adds that LIC and the government put in ₹9,300 crore more in September 2019. On this view, the public funded the recovery, and a sale hands the gain to a buyer.²⁰

The “already profitable” argument rests on three years of results. IDBI reported a net profit of ₹5,634 crore in FY24, up 55 percent and an all-time high at the time.²³ It reported ₹7,515 crore in FY25 and ₹9,513 crore in FY26, up 27 percent on FY25.¹ The writer’s point is that the bank now earns money, so a sale passes profits to a new owner that the public helped build.

The other side can read the same figures. The profits came after the ₹9,300 crore capital injection in 2019 from LIC and the government.²⁰ Both sides can cite the same numbers and still disagree about who should own the bank that produces them.

The writer dates the 2003 assurance precisely. The Finance Minister is said to have given it in the Lok Sabha on 8 December 2003 and in the Rajya Sabha on 15 December 2003.²⁰ We have not checked the official debates, so the dates are the writer’s, not ours.

The foreign-control argument is about ownership, not price. The buyer is Fairfax Financial Holdings of Toronto, and the unions say a bank holding large public savings should not pass to a foreign owner at all.²⁰ That is a claim about who owns the bank, so a higher bid does not answer it.

The IDBI Bank turnaround in numbers

IDBI Bank made large losses in the late 2010s. Its standalone net loss was ₹15,116.30 crore in FY19, and its gross NPA ratio, the share of loans that had turned bad, was 27.47 percent.² Its profit rose to ₹3,645 crore in FY23, the highest to that point.²⁴ In FY26 it reported a net profit of ₹9,513 crore, up 27 percent on FY25¹.¹

The gross NPA ratio was 2.32 percent at March 2026, and the net NPA ratio was 0.15 percent.¹ The recovery came while LIC and the government still owned the bank. The sale was approved after the recovery, not before it.

The same Business Standard review gives a capital adequacy ratio of 26.65 percent at March 2026, with deposits of ₹3.47 trillion (up 12 percent) and net advances of ₹2.54 trillion (up 16 percent) for the year.⁷ By June 2026 the net NPA ratio was 0.16 percent and the capital adequacy ratio was 26.92 percent.¹⁵

What happens to the IDBI Bank share price?

The share price moved sharply after the approval. IDBI Bank shares closed at about ₹90 on 14 October 2026, above the ₹81 bid.¹⁵ Ascendants reports a fall of more than 7 percent on 15 October, and says the ₹81 deal price was below the previous day's market close, which helps explain why the announcement did not lift the stock.²⁵

The chart sets the ₹81 bid against the ₹75.99 fair value and against the stock's valuation-period range of ₹61.01 to ₹118.38 per share.³ The range is wide, so one day's price is a weak guide to what the bank is worth. This is not investment advice.

Has bank privatisation in India improved banking?

The evidence from India is indirect. Between 2015 and 2020 the public sector banks' share of loans fell from 74.28 percent to 59.8 percent, while private banks rose from 21.26 percent to 36.04 percent, according to RBI data as reported by ThePrint.²⁶ Deposits moved the same way, with the public sector share falling from 76.26 percent to 64.75 percent.²⁶

These figures show who gained market share. They do not show what a sale does to one bank once its owner changes, which is the question the IDBI sale raises. Market share and bank performance are different tests, and the IDBI sale has not closed, so its effects under a new owner are not yet measured.

How the wider banking sector recovered

IDBI was not the only bank in trouble. The government recapitalised public sector banks with ₹3,10,997 crore over the five financial years FY17 to FY21, a Lok Sabha reply said in February 2022.¹⁰ About ₹34,997 crore came from the budget, and ₹2,76,000 crore came from recapitalisation bonds.¹⁰

The bad-loan problem was sector-wide.

The Reserve Bank’s Financial Stability Report put gross NPAs at 2.8 percent for public sector banks in March 2025, down from 3.7 percent in March 2024. Private banks stood at 2.8 percent, stable on the year.²⁷ The overall ratio was 2.3 percent of total loans at 31 March 2025.²⁷

Public sector banks earned a combined record ₹1,78,364 crore in FY25, up 26 percent on FY24’s ₹1.41 lakh crore. State Bank of India alone earned ₹70,901 crore, up 16 percent.²⁸ IDBI’s turnaround is one case within that shift, and the figures alone do not show its cause.

The comparison matters for one reason. IDBI’s gross NPA ratio fell from 27.47 percent in FY19 to 2.32 percent in FY26.²¹ The sector’s ratio also fell after March 2018.²⁹ The recovery was not limited to IDBI, which matters for judging the sale.

What is still to happen in the IDBI Bank sale?

The IDBI Bank privatisation is not finished. The winning bidder must provide its documents to the Reserve Bank of India, and the share purchase agreement is signed only after the RBI clears the buyer.⁵ Completion is expected by 31 March 2027, subject to RBI approval.⁵

After the agreement is signed, the buyer must make an open offer to minority shareholders. Business Today reports that about 4 percent more of the bank will be available to retail investors as LIC cuts its stake from 19 percent to 15 percent.¹⁷

Outlook Business reports the DIPAM Secretary as saying that invested capital will be locked in for three years, that the IDBI brand name will stay the same, and that LIC must bring its stake down to 15 percent within two years under RBI norms.¹⁸ Finshots reports a five-year lock-in under RBI promoter rules, which we could not match to the deal terms, so we give the official three-year figure and flag the difference.³⁰

What does the sale mean for the government’s budget?

The IDBI Bank privatisation is also a fiscal event. The Centre budgeted ₹80,000 crore for FY27 from disinvestment and asset monetisation combined, and it had raised ₹62,124 crore by 10 September 2026.¹³ That total is ₹55,757 crore from disinvestment and ₹6,367 crore from asset monetisation.¹³

The government’s 30.48 percent stake is estimated to bring around ₹26,000 crore. With that, the total could reach around ₹88,000 crore, about ₹8,000 crore above the target.¹³ That estimate assumes the deal closes within FY27, so it is a projection, not a receipt.