IDBI Bank: How a crisis-hit lender reached a ₹52,878-crore strategic sale

The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved strategic restructuring of a 60.72% stake in IDBI Bank to 10955230 Canada Inc., a subsidiary of Canada's Fairfax Financial Holdings, for ₹52,878.08 crore. The Union government will offload 30.48% and Life Insurance Corporation of India (LIC) 30.24%.

The transaction marks a major step in the government's effort to transfer management control of a bank that once faced severe asset-quality problems and capital constraints. The deal has not closed, and the buyer must meet the applicable regulatory requirements. The government has targeted completion by March 31, 2027.

How did IDBI Bank land in crisis?

Established in 1964 as a development finance institution (DFI) to provide long-term funding to industry, IDBI was converted into a commercial bank in 2004. Its financial position deteriorated as corporate borrowers defaulted and bad loans mounted.

Gross non-performing assets (NPAs), or loans that have turned bad, rose from 3.22% of total loans in March 2013 to 10.98% in March 2016 and 21.25% in March 2017. The Reserve Bank of India (RBI) placed the lender under its Prompt Corrective Action framework in May 2017, restricting its ability to expand lending and undertake certain activities.

By September 2018, gross NPAs had reached 31.78%, net NPAs stood at 17.30%, and the capital adequacy ratio had fallen to 6.22%. The bank's exposures to borrowers including Kingfisher Airlines and ABG Shipyard also became part of investigations into troubled lending.

What changed after the government and LIC stepped in?

The government repeatedly infused capital into IDBI Bank during the crisis. Estimates put central capital support between 2010 and 2020 at around ₹25,000 crore, although records distinguish between funds allocated and amounts actually released.

LIC acquired a 51% controlling stake in January 2019, investing about ₹21,624 crore. The RBI classified IDBI Bank as a private-sector lender from January 21, 2019. The regulator lifted the bank's Prompt Corrective Action restrictions in March 2021.

The financial position has since improved substantially. In FY26, IDBI Bank reported a record net profit of ₹9,513 crore. As of March 31, 2026, gross NPAs had fallen to 2.32%, net NPAs to 0.15%, and capital adequacy had recovered to 26.65%.

Provisional figures showed total business of ₹6,27,149 crore as of September 30, 2026, up 18% year-on-year. The bank's unaudited quarterly results are scheduled for October 17. The improvement reflects a stronger balance sheet, though the available figures do not apportion the recovery among capital support, recoveries and management decisions.

Why did the sale take years?

The CCEA gave in-principle approval for strategic disinvestment in May 2021. The government invited expressions of interest on October 7, 2022, and five parties initially applied, of which four qualified and two submitted financial bids.

The initial bidding round stalled in early 2026 after the offers reportedly fell below the government's confidential reserve price. The process paused in March, before revised bids were submitted in July.

The government subsequently considered two independent valuations, one based on comparisons with public-sector banks and another on asset values. Their average was ₹75.99 per share. Fairfax's successful offer of ₹81 per share is about 6.6% higher than that benchmark. The reserve price from the earlier round was not publicly disclosed, making a direct comparison between the two bidding rounds difficult.

What does the Fairfax deal mean?

The ₹52,878.08-crore consideration covers the 60.72% stake being sold, not the entire bank. At ₹81 per share, the transaction implies an equity valuation of roughly ₹87,000 crore.

After the sale, the Centre will retain 15% and LIC 19%, leaving them with a combined 34% stake. Fairfax will acquire controlling ownership, subject to completion and applicable approvals. An open offer to minority shareholders is also expected, though its price and size were not confirmed in the material reviewed.

The change in ownership does not remove IDBI Bank from RBI supervision. Deposit insurance through the Deposit Insurance and Credit Guarantee Corporation remains available up to ₹5 lakh per depositor per bank, while applicable priority-sector lending obligations continue. The government has not published a detailed plan from Fairfax for the bank's branches, staffing or future business strategy.