Fairfax’s IDBI Bank deal revives India’s privatisation drive

[BENGALURU] India’s sale of a controlling stake in IDBI Bank to Canada’s Fairfax Financial Holdings for nearly 530 billion rupees (US$5.6 billion) will deliver the largest foreign direct investment in the country’s financial sector, while injecting life into a privatisation drive that has been dogged by weak investor interest and valuation disputes. 

The deal also represents a calibrated opening of India’s banking ownership framework rather than an immediate liberalisation or the beginning of an accelerated privatisation cycle, said Rajesh Agarwal, head of research at AUM Capital Market.

On Wednesday (Oct 14), the Indian government approved the sale of a 60.72 per cent stake in IDBI for 528.78 billion rupees. The deal marks a major step in the Canadian firm’s entry into the state-controlled Indian bank that has been ailing financially and needed rescue.