New Delhi: IDBI Bank will soon convene the board meeting to approve allotment of preference shares to LIC, enabling the insurance behemoth to acquire a 51% stake in the bank.
The meeting could take place in a day or two, people familiar with the matter said. The board should approve the allotment latest by the end of this week, they added.
The board of LIC on Monday gave its approval for the insurer to acquire IDBI Bank by raising its stake to 51% via preferential shares. After the approval, both entities will seek regulatory clearances, including those from the Securities and Exchange Board of India (Sebi) and Reserve Bank of India (RBI).
The Insurance Regulatory and Development Authority of India (Irdai) has already given its approval to LIC for the stake purchase, a move which will help the debt-ridden state-owned bank receive capital support of Rs10,000-13,000 crore. Irdai at its meeting held in Hyderabad last month, had permitted LIC to increase its stake in IDBI Bank from 7.98% as of 30 June 2018, to 51%.
By current regulations, an insurance company cannot own more than 15% in any listed financial company.
If the deal goes through, IDBI Bank, which is grappling with mounting toxic loans with gross non-performing assets (NPAs) at a staggering Rs55,600 crore at the end of the March quarter, will get much needed capital support.