Fairfax may get up to two years to resolve its CSB Bank holding if it wins the IDBI Bank stake sale
India may give Canada’s Fairfax Financial Holdings up to two years to resolve its ownership of CSB Bank if it acquires a majority stake in IDBI Bank, Reuters reported on Friday, citing people familiar with the matter.
Fairfax is among the frontrunners for the government’s stake in IDBI Bank. The proposed transaction, valued at more than $5 billion, is in its final stages and would mark one of the largest foreign investments in an Indian bank.
Fairfax owns about 40 per cent of CSB Bank. Under Reserve Bank of India (RBI) rules, an entity cannot own and operate two separate banks. If Fairfax acquires control of IDBI Bank, it would therefore have to resolve its existing holding in CSB.
Fairfax could be given up to two years to either sell its stake in CSB Bank or merge the lender with IDBI Bank, the report said, adding that it was “speculative” to say Fairfax would be given two years to consolidate its banking holdings.
Fairfax has two options
A merger of CSB Bank with IDBI Bank is one option being considered, the report said. Fairfax’s India entity is also exploring the possibility of selling its entire stake in CSB Bank.
More from BusinessThe Canadian investor may prefer a sale because a merger could involve operational and labour-related complications, the report said. CSB Bank is also much smaller than IDBI Bank, limiting the impact it would have on the combined lender.
CSB Bank, headquartered in Kerala, had a business size of Rs 86,282 crore as of the latest reported period. Fairfax took control of the lender in 2018 after it needed fresh capital to strengthen its finances.
Any decision on the future of CSB Bank is still at an early stage and will depend on negotiations between Fairfax and the government, according to the Reuters report.
IDBI Bank sale moves closer
The government’s planned sale of a majority stake in IDBI Bank has been delayed for several years but is now nearing completion.
India received revised bids from Fairfax and Emirates NBD last month after the government lowered the reserve price for the stake sale.
The transaction has already been cleared by a panel of senior bureaucrats and is now before a committee of ministers for final approval, according to the sources.
The deal would subsequently require regulatory clearances, including from the RBI and the Securities and Exchange Board of India (SEBI).
The government and Life Insurance Corporation of India (LIC), the two major shareholders in IDBI Bank, are selling a combined 60.72 per cent stake in the lender.
Why the deal matters
The proposed transaction is significant for India’s banking sector. Valued at more than $5 billion, it would be the largest foreign investment in an Indian bank, according to Reuters.
The sale also comes at a time when India is seeking to attract foreign capital amid pressure on its finances and the rupee.
For Fairfax, IDBI Bank would add a large banking asset to a portfolio that already has significant exposure to India’s financial sector.
Fairfax India Holdings Corporation had assets worth $3.8 billion as of June 30, 2026. Its other investments in India include non-bank lender IIFL Capital and online brokerage firm 5paisa.
The immediate challenge, however, is clear: Fairfax would have to decide what to do with its sizeable CSB Bank holding if it wins the IDBI Bank bid.
The reported two-year window could give the investor time to either find a buyer for its CSB stake or work towards a merger with IDBI Bank, while allowing the government to proceed with the long-pending stake sale.
