IRDAI has defended the exemption given to LIC for acquiring up to 51% stake in the IDBI Bank, saying the decision was based purely on merits of the case.
Nilesh Sathe, whole-time member of IRDAI, said LIC had sought an exemption to invest in the debt-ridden bank purely as an investment and added that LIC was given at least three such exemptions in the past.
Sathe said that LIC will bring down its stake in IDBI Bank to less than 15 per cent over a period of time. No deadline has been set for LIC to comply with this norm as it could have put pressure on the IDBI Bank stock, he explained.
According to Sathe, LIC is free to chart its investment strategy which is not influenced by the insurance regulator.
LIC’s proposal to invest in IDBI Bank has been criticised by experts and investors who believe that policyholder’s money should not be used to bail out cash-strapped banks.
LIC has been using money generated by selling policies to bail out government disinvestment programmes and investors are worried about the impact on their returns.
Market participants had also cautioned that IDBI Bank’s financials are too weak and a turnaround is highly unlikely in the near term.