Shares of IDBI Bank surged 10 per cent to Rs 29.65 per share intra-day on Tuesday after Union Cabinet approved one-time infusion of fresh capital to the tune of Rs 9,257 crore by both Government and Life Insurance Corporation (LIC).

Of the above amount, Rs 4,700 crore will be infused by LIC and Rs 4,557 crore will be infused by the government. The bank was in talks with investors, including LIC, to raise Rs 10,000 crore capital by the end of second quarter to meet minimum regulatory requirements.

At 2:50 pm, IDBI Bank was trading 8.79 per cent higher at Rs 29.2. In comparison, the benchmark S&P BSE Sensex was ruling 617 points lower at 36,716.

In January, LIC completed the process of picking up a controlling 51 per cent stake in the nearly crippled IDBI Bank. In May 2018, while IDBI Bank was close to a stake sale in the life insurance company this deal could not be completed due to valuation concerns. Now with LIC as the majority shareholder, the stake sale process has to begin afresh.

The public lender-turned-private lender has been under the Reserve Bank of India's (RBI) prompt corrective action (PCA) framework that put restrictions on its lending abilities.

For the June quarter, IDBI Bank posted net loss of Rs 3,800 crore compared to a loss of Rs 2,410 crore in the year-ago period. The net interest income (NII) of IDBI Bank was down 11.1 percent at Rs 1,458 crore against Rs 1,639 crore.

On the other hand, the bank's gross NPA was up 160 bps to 29.1 percent against 27.5 percent, while net NPA decreased 210 bps to 8 percent against 10.1 percent, QoQ.

Last week, the government unveiled a mega plan to merge 10 public sector banks into four as part of plans to create fewer and stronger global-sized lenders as it looks to boost economic growth from a six-year low.