By Express News Service
NEW DELHI: The Union Cabinet has approved Life Insurance Corporation’s (LIC) proposal to own controlling stake in state-owned IDBI bank, thus paving way for the insurance major to acquire 51 per cent share in the Public Sector Bank, consequently taking the government’s stake down from current 80.96 per cent to around 45 per cent.
“The government has infused capital to the tune of Rs 16,000 crore since 2015... For further capital infusion, expansion of the bank’s reach and bringing professional management, the Cabinet has approved LIC’s takeover of IDBI Bank,” Interim Finance Minister Piyush Goyal told reporters after the meeting of Cabinet Committee of Economic Affairs on Wednesday.
The acquisition will make IDBI Bank a subsidiary of the state-run insurance corporation. “IDBI will be a 51 per cent subsidiary of LIC,” Goyal said.
The board of IDBI bank was awaiting the Centre’s approval to accept LIC’s offer to acquire the stake in the bank. The state-run insurance corporation had proposed to increase its stake in the bank after its board gave nod to the move on July 16.Currently, LIC holds 10.82 per cent stake in IDBI and will buy additional 40-45 per cent after the approval from the Cabinet.
“Boards of both LIC and IDBI Bank have approved the acquisition... IRDAI has also given in-principle approval... Once the final approval by IRDAI (Insurance Regulatory and Development Authority of India) is received, due diligence will be done and fresh equity will be issued to LIC by IDBI,” Goyal said, adding that the deal is a “win-win” move for both the entities.
LIC received IRDAI’s, approval to hold more than 15 per cent stake in the bank on the condition that the insurance major will gradually bring its stake in the bank down after a few years.
After the Cabinet approval, the deal now awaits go-ahead from the RBI and Securities Exchange Board of India (SEBI).
