India's cabinet has approved the sale of a controlling 60.72% stake in IDBI Bank to Fairfax Financial Holdings for INR 528.8 billion, putting the state-controlled lender on course for foreign private ownership after a sale process that stalled earlier this year.

The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, approved the deal on Oct. 14, according to The Federal and a PTI report carried by ThePrint. The buyer is 10955230 Canada Inc., a subsidiary of Toronto-based Fairfax, the financial group led by Prem Watsa. Fairfax will pay INR 81 a share, IIFL reported.

Union Minister Ashwini Vaishnaw, who briefed reporters on the decision, said the deal, once executed, would be the “biggest foreign direct investment in India's financial sector,” according to IIFL. Finance Minister Nirmala Sitharaman called the transaction a milestone, The Federal reported.

Who sells, and what the state keeps

The stake comes from two holders: the central government, with 30.48%, and Life Insurance Corp. of India, with 30.24%. After the sale, the government will hold about 15% and LIC about 19%, a combined 34%, according to Business Today and Swarajya.

When the INR 81 price was first reported in July, Angel One estimated it would bring the government about INR 266 billion for its portion and LIC about INR 264 billion for its own.

The price is above a benchmark fair value of INR 75.99 a share set by two independent valuers, The Federal reported. It is well below the INR 94.42 reserve price that sank the first round: the government put the sale on hold in March after bids from Fairfax and Emirates NBD fell short of that level, then invited revised offers in July, according to ThePrint and Outlook Business.

IDBI shares rallied as the approval became known. The stock closed at INR 90.39 on the National Stock Exchange on Oct. 14, up about 9%, IIFL reported, after rising as much as 13% intraday, according to Business Today. The next morning it fell more than 7% to below INR 84, as investors compared the market price with Fairfax's lower INR 81 offer, Outlook Business reported. Shares of CSB Bank, in which Fairfax holds about 40%, rose 5.7% on Oct. 14, according to Business Today.

Conditions before Fairfax takes control

Cabinet approval is not the final step. The Reserve Bank of India must complete a fit-and-proper assessment of the new owner, and the Competition Commission of India must clear the transaction, according to The Federal and Swarajya. IIFL reported that Fairfax must also present the RBI with a roadmap for meeting the regulator's conditions.

The Federal reported several long-dated obligations. RBI rules cap a promoter's holding at 26%, and Fairfax will have up to 15 years to reach that level, with a five-year lock-in on its shares. The new owner must keep the IDBI name, brand and customer relationships for at least three years, and LIC must cut its residual stake from 19% to 15% within two years.

Fairfax must also make an open offer to IDBI's public shareholders unless the Securities and Exchange Board of India waives the requirement, The Federal said. Because RBI rules bar a promoter from holding two banking licenses, Fairfax must merge CSB Bank into IDBI Bank or exit that holding within two years, according to The Federal and Business Today.

Arunish Chawla, secretary of the Department of Investment and Public Asset Management, said the deal should be completed before the current fiscal year ends in March 2027, The Federal and Swarajya reported. After completion, the government will leave IDBI's board.

A nine-year road back

The sale caps a long recovery. The RBI placed IDBI under its Prompt Corrective Action framework in May 2017, LIC took a 51% controlling stake in January 2019, and the bank exited the framework in March 2021, according to the timeline published by ThePrint. The cabinet first approved a strategic sale in May 2021, and the government invited expressions of interest in October 2022.

IDBI's gross non-performing asset ratio fell from 31.78% in September 2018 to 2.32% in March 2026, and its capital adequacy ratio rose to 26.65% from 6.22% in 2018, IIFL reported. The bank earned net profit of INR 95.13 billion in the fiscal year ended March 2026, and its total business reached about INR 6.27 trillion at the end of September, up 18% from a year earlier.

For investors in Indian financials, the next markers are the RBI's verdict on Fairfax, the terms of any open offer and the plan for CSB Bank. The outcome will also show how quickly New Delhi can complete strategic sales of state-linked lenders once it has picked a buyer.