LIC to reduce IDBI Bank stake to 19% as Cabinet clears Rs 52,878 crore with Canada’s Fairfax deal

Life Insurance Corporation of India (LIC) will reduce its stake in IDBI Bank to 19 per cent as the Union Cabinet on Wednesday approved the strategic restructuring of the lender, allowing Canada's Fairfax Financial Holdings to acquire a controlling 60.72 per cent stake for Rs 52,878 crore.

Life Insurance Corporation of India (LIC) will reduce its stake in IDBI Bank to 19 per cent as the Union Cabinet on Wednesday approved the strategic restructuring of the lender, allowing Canada's Fairfax Financial Holdings to acquire a controlling 60.72 per cent stake for Rs 52,878 crore. Announcing the decision, Union Minister Ashwini Vaishnaw said the restructuring would help attract foreign investment into India's financial sector and create fresh growth opportunities for small businesses and entrepreneurs.

"A major decision has been taken regarding the financial sector, specifically concerning IDBI, an institution crucial for the growth of our MSMEs and new industries. A decision has been made to undertake the strategic restructuring of IDBI," Vaishnaw said during the Cabinet briefing. According to a Finance Ministry press note on the strategic restructuring, the government will sell its 30.48 per cent stake, while LIC will divest 30.24 per cent. Following the transaction, the government will retain 15 per cent and LIC will hold 19 per cent, taking their combined shareholding to 34 per cent.

Vaishnaw said retaining a minority stake would allow the government and LIC to benefit from the bank's future growth. "The Government of India and LIC will jointly retain a 34% stake in the restructured entity. Retaining this 34% stake will significantly enhance the value of the holdings held by both the Government of India and LIC," he said.

The Cabinet Committee on Economic Affairs (CCEA) approved Fairfax Financial Holdings, through its Canadian subsidiary, as the strategic buyer. The successful bidder offered Rs 81 per share, higher than the independently assessed average fair valuation of Rs 75.99 per share, according to the press note.

The transaction follows an earlier unsuccessful bidding round in 2025-26, when initial offers fell short of the reserve price of Rs 94.42 per share. The government subsequently invited revised offers from qualified bidders. Highlighting the significance of the deal, Vaishnaw said, "This partnership will facilitate the infusion of new capital and pave the way for the largest FDI inflow into India's financial services sector."

The Cabinet has also authorised the sale of the government's remaining 15 per cent shareholding through the open market. LIC will be free to manage its residual 19 per cent stake in accordance with its internal procedures and regulatory requirements. Meanwhile, IDBI Bank shares rallied sharply on Wednesday, closing at Rs 89.85 on the National Stock Exchange, up 8.33 per cent from the previous close of Rs 82.94. The stock touched an intraday high of Rs 93.60.

The restructuring comes after a significant improvement in IDBI Bank's financial position. The bank's gross non-performing assets declined from 31.78 per cent in September 2018 to 2.32 per cent in March 2026.

Net non-performing assets fell from 17.30 per cent to 0.15 per cent during the same period, while the bank reported a net profit of Rs 9,513 crore in FY26. IDBI Bank was placed under the Reserve Bank of India's Prompt Corrective Action framework in May 2017 due to its weak financial health. The restrictions were lifted in March 2021 after improvements in the bank's financial position.

Vaishnaw said the restructuring would also support the financing needs of India's expanding business sector. "This move will create new growth opportunities, particularly for MSMEs, small industries, new entrepreneurs, and those entering the services sector or looking to expand, while also serving as a major opportunity to attract FDI into financial services," he said.

The successful bidder will now have to submit its credentials to the RBI and provide a roadmap for complying with regulatory conditions before the transaction is completed. (ANI)