The Union Cabinet approved on Wednesday the sale of IDBI Bank to Fairfax Financial Holdings for ₹52,878 crore, about $5.6 billion (The Economic Times, The Hindu, Bloomberg, Financial Post). The Economic Times says the buyer is a Fairfax arm, Reuters and The Globe and Mail call the purchase a majority or controlling stake, and The Indian Express carries the Cabinet's own description, a strategic restructuring of the bank. The Hindu and The Economic Times both call it the largest foreign direct investment in India's financial sector. Financial Post carries a Fairfax statement that it was declared the strategic buyer in the auction and plans to contribute Digit Insurance and IIFL Capital to the bank (single outlet). Akhilesh Yadav attacked the BJP over the sale, and Nirmala Sitharaman replied that the INDIA bloc had ruined public sector banks through bad loans (AajTak, News18). The stake size, the price per share and the completion date are not in any report we reviewed.
A foreign group taking control of a large bank is rare in a sector the state has long dominated, and the size of the cheque makes it the biggest test so far of how much foreign money Indian banking will take. It also shows how the government defends such sales: by pointing to the bad loans of the past.
If you hold an account or loan with IDBI Bank, none of the reports we reviewed announces any change to it, and branches, deposits and staff are not discussed in them. The people with a concrete decision from the same Cabinet meeting are railway employees, who get a Diwali bonus, and families covered by the social assistance scheme.
Supporters say a long-term financial investor can fix a lender that the state has struggled to run, and that the earlier UPA government left public sector banks with bad loans (Sitharaman, as reported by News18).
Critics such as Akhilesh Yadav say a public asset is being handed over (AajTak). Others will ask for the price per share, which no report gives.
The price is public; the terms are not. Watch for the percentage stake, the price per share, the regulatory approvals Fairfax still needs and the timetable. The plan to put Digit Insurance and IIFL Capital inside the bank comes from one outlet, and it matters: it would change who owns what, and minority shareholders will want the structure spelt out.
The Economic Times · The Hindu · Reuters · Bloomberg · The Indian Express · The Globe and Mail · Financial Post · AajTak · News18 (Oct 14)
Cabinet clears Fairfax's ₹52,878-crore purchase of a controlling stake in IDBI Bank, the largest foreign investment in Indian financeCabinet clears Fairfax's ₹52,878-crore purchase of a controlling stake in IDBI Bank, the largest foreign investment in Indian finance
The Canadian group's bid for the state-owned lender won the Union Cabinet's approval on Wednesday. The finance minister answered Akhilesh Yadav's attack on the sale by blaming the opposition alliance for public sector banks' bad loans.
The Union Cabinet on Wednesday approved the sale of IDBI Bank to Fairfax Financial Holdings, the Canadian investment group, for ₹52,878 crore (about $5.6 billion), The Economic Times and The Hindu report. Both call it the largest foreign direct investment (FDI) ever made in India's financial sector. Reuters and The Globe and Mail describe the purchase as a majority or controlling stake, and Bloomberg calls it the biggest bank deal in India. The Economic Times says the buyer is an arm of Fairfax; The Indian Express carries the Cabinet's own phrase, a "strategic restructuring" of the bank. AajTak put it for Hindi readers in one line: the Cabinet has cleared the sale of a government bank to a Canadian company. The rupee and dollar prices, which The Globe and Mail gives as $5.56 billion, imply a rate of about 95 to the dollar, close to the rupee's level this week, so the two figures appear to describe the same price.
The detail is thin. None of the reports we reviewed gives the size of the stake in per cent, the price per share or a completion date, so we give none. Financial Post carries a Fairfax announcement that it was declared the "strategic buyer" in the auction and plans to contribute Digit Insurance and IIFL Capital to IDBI Bank; we have that from one outlet only, and how such a combination would work is not explained. The auction itself is described only in that announcement, and we have seen no list of rival bidders. In a separate piece The Economic Times counts 13 disinvestments by the Modi government in ten years, a measure of how often the state has sold its holdings.
Politics arrived within hours. Samajwadi Party chief Akhilesh Yadav went after the Bharatiya Janata Party (BJP) over the sale, and AajTak reports Finance Minister Nirmala Sitharaman's reply under a "crocodile tears" headline. News18 reports that she blamed the INDIA bloc, the opposition alliance, for ruining public sector banks through bad loans, a charge aimed at the earlier UPA government. Both sides are arguing about who left the bank in its present state, and that is our reading; neither argument tells a depositor what happens next.
The same Cabinet meeting approved a ₹2,009.61 crore (about $211 million) performance-linked Diwali bonus for 11.40 lakh (1.14 million) railway employees, worth 78 days' pay, and ₹53,428 crore (about $5.6 billion) for a social assistance scheme that also revises disability pension norms (The Hindu, Mint, The Economic Times, Dainik Bhaskar). Bhaskar's headline reads the new norms as a pension for people with 40 per cent disability from birth; we have not seen the notification. Of the three decisions the bank sale is the one whose consequences carry no date. Whether it needs further regulatory clearances, and how long they take, is not covered in anything we saw.