With reference to the acquisition of IDBI Bank and banking regulations, consider the following statements: 1. Fairfax Financial Holdings acquired a 51 per cent stake in IDBI Bank. 2. The government approved the acquisition price for the stake at Rs 52,878 crore. 3. The Reserve Bank of India uses the Prompt Corrective Action framework to monitor stressed banks. Which of the statements given above is/are correct?

Cabinet Committee approves Fairfax Financial Holdings to acquire 60.72 per cent IDBI Bank stake

GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims + Mains· 15 October 2026

PCA framework and strategic disinvestment: a key GS3 topic for banking reforms and financial stability.

Why in news

The Cabinet Committee on Economic Affairs approved Fairfax Financial Holdings' acquisition of a 60.72 per cent controlling stake in IDBI Bank for Rs 52,878 crore as part of a strategic disinvestment plan.

Background

The Reserve Bank of India placed IDBI Bank under the Prompt Corrective Action framework in May 2017. Following LIC's acquisition of a 51 per cent stake in January 2019, the government and LIC initiated a strategic disinvestment process.

Facts for Prelims

BodyPrompt Corrective Action (PCA) is a framework used by the Reserve Bank of India (RBI) to monitor and intervene in stressed banks.
FactFairfax Financial Holdings, led by Prem Watsa, acquired a 60.72 per cent controlling stake in IDBI Bank.
FactThe acquisition price for the controlling stake in IDBI Bank was approved at Rs 52,878 crore.
FactLIC acquired a 51 per cent stake in IDBI Bank in January 2019.

Prelims practice question

With reference to the acquisition of IDBI Bank and banking regulations, consider the following statements:

Fairfax Financial Holdings acquired a 51 per cent stake in IDBI Bank.
The government approved the acquisition price for the stake at Rs 52,878 crore.
The Reserve Bank of India uses the Prompt Corrective Action framework to monitor stressed banks.

Which of the statements given above is/are correct?

(a)3 only
(b)1 and 2 only
(c)1 and 3 only
(d)2 and 3 only

Show answer

Answer: (d) 2 and 3 only — Statements 2 and 3 are correct. Statement 1 is incorrect: Fairfax Financial Holdings acquired a 60.72 per cent controlling stake.

For Mains

Q. Discuss the significance of the Prompt Corrective Action framework in maintaining the stability of the Indian banking sector and the role of strategic disinvestment in banking reforms.

Dimensions to cover in your answer

Systemic risk mitigation: PCA as a tool to prevent bank failures and protect depositors
Capital infusion: Role of private equity in recapitalizing public-sector-linked banks
Disinvestment strategy: Balancing fiscal targets with the maintenance of banking sector stability

Keywords: Prompt Corrective Action · Strategic Disinvestment · Capital Adequacy · Banking Reform · Public Sector Banks

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