NEW DELHI : Life Insurance Corporation of India (LIC) is reluctant to raise its holding in Yes Bank Ltd although the Reserve Bank of India (RBI) and the finance ministry are keen that it buys an additional 4-5% stake in the troubled private lender, said two government officials familiar with the development.
LIC holds an 8.06% stake in the bank co-founded by Rana Kapoor, who is under arrest amid allegations of money laundering. State Bank of India (SBI) has been tasked by the government to lead the rescue of crisis-hit Yes Bank.
The country’s largest insurer is not inclined to raise its holding as it took a controlling 51% stake in loss-making IDBI Bank last year.
LIC also plans to launch its own initial public offering. Finance minister Nirmala Sitharaman announced in the 2020-21 Union budget that LIC, a wholly-owned government undertaking, will be listed. “When the meetings involving officials of RBI, finance ministry and SBI were held to rescue Yes Bank, LIC’s name was also discussed. But the insurer isn’t too keen," one of the two officials said on condition of anonymity.
The second official said the finance ministry hasn’t yet made it “mandatory" for LIC to pick up the stake and had so far kept the option open for the life insurer. “LIC will have to convince the ministry that it really is in no position to buy stake in Yes Bank. It could go either way," the official said.
Emailed queries to the finance ministry and LIC remained unanswered.
As per RBI rules, LIC can’t hold more than 10% in a bank though the central bank made an exemption when the life insurer bought the 51% stake in IDBI Bank. LIC invested ₹21,624 crore in IDBI Bank in FY19 under a finance ministry-assisted deal to save the lender from collapse. The stake totalling 5.29 billion shares of IDBI Bank is now worth ₹11,276 crore as per the bank’s closing price of ₹21.30 on the BSE Thursday.
“An insurer holding stake in two large banks, one of which it has just stabilized (IDBI Bank) but not earned returns on its investment and another that will take long to strengthen, will find it difficult to sell a public offering to investors," said a merchant banker, who declined to be named as he may pitch for the IPO mandate.
