IRDAI permits LIC to pick up to 51 percent stake in IDBI Bank

IRDAI has allowed LIC to acquire up to 51 percent stake in IDBI Bank. IRDAI has approved the plan that will help convert the debt-ridden lender into a private sector entity. According to sources, the board of IRDA at its meeting in Hyderabad permitted LIC to increase the current stake from 10.82 per cent to 51 per cent in IDBI Bank. This would be in deviation from the existing rules which restrict any insurers having stake beyond 15 per cent in the financial firms. Sources added that if the deal goes through, the IDBI Bank would get a capital support of Rs 10,000-Rs 13,000 crore. LIC has 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. For LIC it will get about 2,000 branches through which it can sell its products while the bank would get massive funds of LIC. The bank would also get accounts of about 22 crore policy holders and subsequent flow of fund into their account. If the deal goes through IDBI Bank which is grappling with mounting toxic loans with gross non-performing assets rising to a staggering Rs 55,600 crore at the end of latest March quarter would get much-needed capital support to revive its fortune. During the three months, the lender’s net loss stood at Rs 5,663 crore. The government would not get the proceeds from the stake reduction as the money would be utilised for the bank’s revival. It could happen through issuance of fresh equity so that the government’s stake which is presently at 80.96 per cent would come down below 50 per cent as announced in the Budget.