IDBI Bank: Big news for IDBI bank customers. On Wednesday, the Union Cabinet gave the green light for selling a 60.72 percent stake in IDBI Bank. Canada-based Fairfax Financial Holdings Limited will purchase this 60.72 percent stake for Rs 52,878.08 crore. It’s the biggest strategic disinvestment the country has seen since Air India was sold off. The Cabinet Committee on Economic Affairs (CCEA), led by Prime Minister Narendra Modi, made this decision at their meeting.
The financial sector is set to receive the largest FDI in history
This move by the government represents an important milestone in wrapping up a disinvestment effort that’s been underway for over five years. “Once finalized, this transaction will mark the largest foreign direct investment (FDI) ever made in India’s financial sector,” the government shared in a statement. Information and Broadcasting Minister Ashwini Vaishnav also addressed the media regarding the Cabinet’s choice on IDBI Bank’s strategic overhaul.
Both the central government and state-owned insurance company LIC are jointly divesting their stake
Following this strategic overhaul, India’s government will retain 15 percent of IDBI Bank, while Life Insurance Corporation of India (LIC), a state-owned insurer, will keep 19 percent. The planned sale of the joint 60.72 percent stake currently held by the government and LIC will enable Fairfax to take control of the bank. That said, this deal remains contingent on final approval and obtaining all required regulatory clearances.
The transaction covers the 30.48% stake owned by the central government and the 30.24% stake owned by LIC. “The Cabinet Committee on Economic Affairs has greenlit the deal with M/s 10955230 Canada Inc. (whose parent is M/s Fairfax Financial Holdings Limited) serving as the strategic buyer. This company will buy a 60.72 per cent stake in IDBI Bank at a cost of Rs 52,877.08 crore. The sale encompasses the central government’s 30.48 per cent stake and LIC’s 30.24 per cent stake,” the government announced in a statement.
The acquisition deal will be completed in this financial year
Arunish Chawla, Secretary of the Department of Investment and Public Asset Management (DIPAM), stated that the acquisition deal would be completed within the current financial year. He added that the interests of IDBI Bank employees would be fully taken into account. Fairfax will also have to make an open offer to minority shareholders. Fairfax, which also holds a stake in CSB Bank, will have to either merge CSB Bank with IDBI Bank within two years or exit by selling its stake in CSB Bank.