The Insurance Regulatory and Development Authority of India on Friday approved the Life Insurance Corporation’s proposal to increase its stake in IDBI Bank to 51%. The state-run bank had reported a net loss of Rs 8,238 crore in 2018-’19, The Hindu reported.
LIC at present owns 10.8% stake in IDBI. The insurance regulator has allowed the company to raise its stake to 51% subject to the condition that it would later reduce it to 15%, the maximum permitted under the law, The Times of India reported. The government holds over 80% of the bank’s shares.
An additional 40.2% stake in IDBI Bank will cost LIC Rs 9,229 crore at the current share price of Rs 55. However, the insurance firm’s investment will be higher as part of it will go into fresh equity capital.
LIC will take control of over 2,200 IDBI Bank branches through which it can sell its products. In return, the bank will get the benefit of infusion of funds by the insurer, PTI reported.
“The government will consider the option of reducing its stake to below 50% [in IDBI],” Finance Minister Arun Jaitley had said while presenting the 2016-’17 budget. Earlier this year, the government infused Rs 10,610 crore into the bank.