LIC gets Irdai nod to up stake in IDBI Bank
MUMBAI/CHENNAI: The Insurance Regulatory and Development Authority of India (Irdai) on Friday approved Life Insurance Corporation of India’s (LIC’S) proposal to acquire a majority stake in IDBI Bank Ltd, which will take its stake to 51%, said three officials with direct knowledge of the matter who did not want to be named.
LIC currently holds 8% in the state-run bank.
“The insurance regulator has approved LIC’S proposal to acquire a majority stake in IDBI Bank. Insurance rules do not allow an insurance company to invest more than 15% in a company, so the regulator provided LIC an exemption from the norms. LIC will pare stake to 15% in the coming 5-7 years,” said one of the officials cited above. LIC is likely to pay around ₹10,500 crore for a 43% stake, Mint had reported on June 23. Irdai was willing to waive off the regulation if the proposal came to them, Mint reported on June 28.
“The decision to waive the regulatory threshold is based on market conditions and the larger interest of the market and shareholders. This will be an investment where LIC will get three board seats. IDBI Bank will remain a professionally-run board and company,” said the second of the three officials mentioned earlier.
“Irdai has given similar exemption to LIC in the past as well, so this is not new. Irdai will also allow the private sector to invest beyond the stipulated limit provided they can provide reasoning,” said the third official cited above.
Irdai had not officially confirmed the developments until Mint went to press. A PTI report quoted Irdai chairman Subhash Chandra Khuntia as saying the board’s decision will be printed on the regulator’s website.
These developments come even as debt-ridden IDBI Bank told stock exchanges on Friday that there has been no discussion with LIC regarding investment in the bank.
The government has been trying to privatize IDBI Bank for the past couple of years due to mounting losses and non-performing assets (NPAS). IDBI Bank has the highest NPA ratio among state-run lenders; its gross NPAS almost doubled to ₹55,588.26 crore during fiscal 2018.