The Board of Directors of state-run Life Insurance Corporation (LIC) today approved the proposal to acquire 51 per cent stakes of the debt-stressed IDBI Bank.  At present, the life insurer has around 7.5 per cent stake and will acquire the remaining stake from the government. The government has an 85.96% stake in IDBI Bank.

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"At present, LIC has around 7.5 per cent stake of the IDBI bank and will acquire the remaining stakes from the government", said Subhash Chandra Garg, Secretary, Department of Economic Affairs. He added, open offer may or may not be needed for the deal and probability is that IDBI Bank will issue preference shares to LIC to complete the deal. 

Garg also added that the pricing of the deal will depend on the formula of the preference share issuance. 

Earlier in June 2018, insurance regulator, Insurance Regulatory and Development Authority of India (IRDAI) approved LIC's proposal to increase its stake in troubled IDBI bank with certain terms and conditions. As per current regulations, an insurance company cannot own more than 15 per cent in any listed financial firm. However, it can own more stakes of a listed firm by seeking permission from IRDAI. 

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In addition, there were reports that the government was considering plans to merge at least four state-run banks as part of a larger consolidation plan, triggered by rising bad loans. IDBI also figured in the list. The troubled bank's gross NPA soared to 27.95 per cent of its loans at March 2018 compared to 21.25 per cent at the end of March 2017.