Canada’s Fairfax Financial Holdings could be given up to two years to sell its stake in CSB Bank or merge the lender with IDBI Bank if it succeeds in acquiring a majority stake in IDBI, according to a Reuters report citing people familiar with the matter.
Fairfax is among the leading bidders for the Indian government’s stake in IDBI Bank. The proposed transaction, valued at more than $5 billion, is nearing its final stages and could become one of the largest foreign investments in India’s banking sector.
The Canadian investment firm currently owns about 40 per cent of Kerala-based CSB Bank. Reserve Bank of India regulations do not allow a single entity to own and operate two separate banks, meaning Fairfax would have to address its CSB holding if it takes control of IDBI Bank.
Two options for Fairfax
According to the report, Fairfax could potentially receive a transition period of up to two years to either sell its CSB Bank stake or combine CSB with IDBI Bank. However, the report cautioned that suggestions of a fixed two-year period remain speculative.
A merger between CSB Bank and IDBI Bank is one of the possibilities under consideration. Fairfax’s Indian entity is also exploring the option of selling its entire stake in CSB Bank.
A sale could be the preferred route because merging the two banks may create operational and labour-related challenges. CSB Bank is also considerably smaller than IDBI Bank, meaning its addition would have a relatively limited impact on the size of the combined lender.
CSB Bank reported a total business size of Rs 86,282 crore in its latest reported period. Fairfax took control of the lender in 2018 after the bank required fresh capital to strengthen its financial position.
Any decision on CSB Bank remains at an early stage and would depend on discussions between Fairfax and the Indian government.
IDBI Bank privatization moves closer
India’s long-delayed plan to sell a majority stake in IDBI Bank is now moving closer to completion.
Fairfax and Emirates NBD submitted revised bids last month after the government reduced the reserve price for the transaction. The proposed sale has reportedly received clearance from a panel of senior bureaucrats and is now awaiting final approval from a committee of ministers.
The transaction would subsequently require regulatory approvals, including from the Reserve Bank of India and the Securities and Exchange Board of India.
The Indian government and Life Insurance Corporation of India, IDBI Bank’s two major shareholders, are jointly selling a 60.72 per cent stake in the lender.
Why the deal matters
At more than $5 billion, the IDBI Bank transaction would represent a major foreign investment in India’s financial sector and comes as New Delhi looks to attract additional international capital.
For Fairfax, acquiring IDBI Bank would significantly expand its presence in India’s financial-services industry. Fairfax India Holdings Corporation reported assets of approximately $3.8 billion as of June 30, 2026. Its other Indian investments include financial-services company IIFL Capital and online brokerage 5paisa.
The key issue for Fairfax, however, remains its existing ownership of CSB Bank. If it wins control of IDBI Bank, the Canadian investor would have to restructure its banking interests to comply with Indian regulations.
A potential two-year transition period would give Fairfax time to find a buyer for its CSB Bank stake or pursue a merger with IDBI Bank, while allowing the Indian government to move ahead with its long-pending privatization of the lender.
