Prem Watsa-controlled Fairfax Financial Holdings has not yet taken a call on what it will do with its 40% holding in CSB Bank after it completes the acquisition of a 60.72% stake in IDBI Bank for Rs 52,878 crore.

The Reserve Bank of India (RBI) has given Fairfax two years to decide on the future of CSB Bank after the acquisition deal is sealed with IDBI Bank. The regulator does not allow a single promoter company to own two banks.

“We have two options: either merge or sell. The RBI has given us two years to make the decision as we will hold two bank licences. We’re looking at all of that and will think through this very carefully. There's plenty of time for it and we'll make a decision then,” the Canadian billionaire said.

Fairfax acquired its stake in the Kerala-headquartered CSB Bank in 2018. “The bank’s book value has grown since that time to now about 24% a year. Net advances and loans have grown by 20% a year and the deposits have grown by approximately 15%. It’s profitable and has done extremely well,” Watsa told analysts in a conference call.

On the regulatory requirement to reduce its stake in IDBI Bank, Watsa said Fairfax has been given 15 years by the RBI to cut the holding to 26%. The first deadline is to bring the stake down to 40% at the end of 10 years.

“If the rules remain the same, we'll have to bring our stake down. But when we first began in the insurance business, foreign companies were limited to 26%, then went to 49%, next to 74%, and today it's 100%. So these rules may change, we don't know,” Watsa said. 

Known as the ‘Canadian Warren Buffet’, Watsa said the plan is to transform IDBI Bank into a unified financial services group, combining banking with insurance, investment banking and wealth management. 

Under IDBI Bank’s umbrella, Go Digit Life Insurance, Go Digit General Insurance and IIFL Capital Services will be integrated. The combined entity will operate across three distinct lines of business.

Fairfax will fund the $5.6 billion acquisition of IDBI Bank through a combination of its holding-company cash, dividends from subsidiaries, asset sales and the contribution of its stakes in Go Digit and IIFL Capital at market value. 

The group held about $2.3 billion in cash and marketable securities at the holding-company level as of 30 June, apart from an additional $2.3 billion in investments in associates and consolidated non-insurance companies. Beyond this  $4.6 billion pool, it sold half of its position in Poseidon for approximately $1.9 billion  in the first half of the year. The sale of Eurolife, announced last year, is also expected to close in the second half of 2026 for approximately $900 million.

Fairfax has also averaged $4.3 billion in earnings over the last three years. “So when you go through all those points, you can see that we have a great amount of flexibility for financing this acquisition and the other transactions. And just to point out on our financial leverage, none of this financing includes any long-term debt issuance. So our leverage ratios will not be affected significantly,” Fairfax President and chief operating officer Peter Clarke told analysts.

Post the transaction, Rakesh Sharma, the current managing director and CEO of IDBI Bank, is expected to continue as head of the entity. Former CSB Bank CEO C V R Rajendran will work closely as an advisor while former ICICI Prudential Life MD and CEO NS Kannan will be chairman of the bank, subject to RBI approval.

Kamesh Goyal will continue to lead Digit, while IIFL Capital’s existing management team will handle its operations.

Fairfax’s interests in Digit and IIFL Capital Services will go to IDBI Bank. 

Watsa expects the regulatory approvals for the IDBI Bank transaction to be over by the first quarter of 2027. “It could happen sooner, too. We're working closely with the regulatory bodies. We expect the process to go as quickly as it can,” he said.

All the transactions will be subject to approvals from the RBI, market regulator SEBI and insurance regulator IRDAI.