IRDAI has that it will set the timeline to reduce LIC’s shareholding in IDBI Bank from 51 % to 15%. However, it added that the timeline will only be set after looking at LIC’s business plan post-acquisition of 51 per cent stake in debt-ridden IDBI Bank.
LIC currently holds 7.98 % in debt-ridden IDBI Bank, and is in the process of increasing its stake to 51 per cent, which would help it enter the banking space.
IRDAI in June had permitted LIC to increase its stake to 51 per cent in IDBI Bank. The government, which currently holds 85.96 per cent in IDBI Bank, had also approved the LIC’s proposal to hike stake last month.
“We will look at their (LIC’s) business plan (post acquisition of 51 per cent stake in IDBI Bank) and then decide on reduction of its stake in IDBI Bank (to 15%),” IRDAI chairman S C Khuntia told reporters.
“LIC will have to safeguard the interest of policyholders while reducing it’s stake in the bank,” he said.
LIC board had recently said it has taken a decision on the modalities of increasing stake in IDBI Bank to 51 per cent.
The All India IDBI Officers Association (AIIOA) had challenged the LIC’s move to acquire 51 per cent stake in IDBI Bank in the Delhi High Court. It has also sought withdrawal of the approval given by the IRDAI to the transaction.
When asked whether IRDAI has responded to the court against the petition filed by the IDBI employees, Khuntia said, “We have responded to the court. IRDAI has the powers to give relaxations in specific cases if they are justified. Here, the LIC has requested that in interest of their expansion they would like to have a synergy with a bank. Some relaxation has been given for this specific case.”
To a query on whether IRDAI will give similar exemption to other insurance companies, he said the decision on it will depend on the merit of the case.