The Life Insurance Corporation of India's (LIC's) board has approved acquiring up to 51 per cent stake in state-run IDBI Bank.
The information was shared by Economic Affairs Secretary Subhash Chandra Garg on July 16, 2018. Garg, who is on the board of the state-run LIC, stated that the move of buying additional stakes would most be likely through a preferential shares issue, enabling injection of funds to IDBI Bank.
Since Insurance Regulatory and Development Authority of India (IRDAI) has already given its approval to LIC for the stake purchase, the corporation will now approach the regulator for the securities market India, Securities and Exchange Board of India (SEBI).
If required, the Life Insurance Corporation is also willing to make an open offer to buy the stakes of the debt-ridden bank.
Till end of June 2018, LIC owned about 8 per cent of IDBI Bank, while the federal government owned 86 per cent.
The move of buying additional stakes by LIC is expected to help IDBI, the debt-ridden state-owned bank, to get a capital support of Rs 100-130 billion.
The Life Insurance Corporation had been looking to enter the banking space by acquiring a majority stake in IDBI Bank as the deal is expected to provide business synergies despite the lender's stressed balance sheet.
Win- win situation
Through the deal, LIC will get about 2,000 branches through which it would be able to sell its products and IDBI, on the other hand, will also profit from the massive funds of LIC.
The bank would also get accounts of about 22 crore policyholders and subsequent flow of funds.
Once the deal goes through, IDBI Bank, which is grappling with mounting loans with gross non-performing assets rising to a staggering Rs 556 billion at the end of the March 2018 quarter, will get the much-needed capital support to revive its fortune.
With inputs from PTI
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Who: LIC board
Where: In IDBI Bank
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