The Board of Directors of state-run LIC has given in-principle approval to purchase 14.90 per cent stake in debt-ridden government-owned IDBI Bank Ltd, the bank said in a stock exchange filing on Tuesday.
The government move is aimed at ensuring a turnaround of the loss-making bank struggling with accumulated bad loans.
"The LIC has given in-principle approval for subscription of equity shares on preferential basis, subject to total exposure not exceeding 14.90 per cent of post-issue capital of IDBI Bank at any point of time," the IDBI filing to the BSE said.
The IDBI Bank's board will meet on August 31 to consider a proposal to seek shareholder approval through postal ballots for preferential issue of capital to the LIC, it added.
The LIC already holds 7-7.5 per cent stake in IDBI Bank and the remaining acquisition will give the insurer a majority holding.
In June, the Insurance Regulatory and Development Authority of India had approved LIC's proposal to increase its holding in IDBI Bank from 10.82 per cent to 51 per cent.
IDBI's gross non-performing assets, or bad loans, totalled a staggering Rs 55,600 crore at the end of the fourth quarter ended March.
The bank reported a net loss of Rs 2,410 crore during the first quarter ending June, which was its seventh consecutive quarterly loss.
Briefing reporters here following a Cabinet meeting on August 1, Railway Minister Piyush Goyal said that increasing LIC's current shareholding of around 6-7 per cent in IDBI to a controlling interest would provide capital infusion for the bank, help professionalise its management, as well as increase the insurer's reach through the 2,000-odd branches of IDBI.
The bank, in turn, would get an opportunity to tap 11 lakh LIC agents for doorstep banking services, he said.
Goyal also noted that with the growth in its income, the IDBI Bank would be positioned to benefit from lower cost of funds through acquisition of low-cost deposits, and fee income from payment services.
--IANS
bc/tsb/sed
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)