State-run Life Insurance Corporation of India (LIC) has been reportedly looking to buy a controlling share in struggling IDBI Bank. According to reports, LIC has sought government approval for the same. The move would mark the entry of LIC in country’s banking system.
According to a report in Mint, LIC is mulling over to buy an additional 43 per cent stake in IDBI Bank for about Rs 10,500 crore. This would increase LIC’s total stake in the bank to 51 per cent. Currently, LIC holds eight per cent share in IDBI Bank. In May, the centre’s share in the bank has increased to 85.96 per cent from 80.96 per cent due to a preferential share sale.
“The LIC board has already approved initiatives for taking controlling stake in taking over a bank. The specific proposal regarding acquisition of controlling stake in IDBI Bank shall be placed before the board after the approval of the government,” the report quoted the person close to the development. It is to be noted that any move of selling the stake would be approved by the Modi government.
Earlier it was reported that the government is weighing various options, including Qualified Institutional Placement (QIP), to bring down its stake in IDBI Bank.
“Three-four options are being looked at, including private placement of shares to institutional investors through QIP route,” a finance ministry official told PTI. The proposal for the issue of equity capital through various alternative modes, including QIP, is listed as one of the agenda for the annual general meeting of the bank to be held in August.
A decision in this regard would be taken in the next few months, the official said, adding the government has already started the transformation process of the bank like re-balancing of its assets along with shedding of stake in the non-core business. In addition, the bank is getting adequate capital support to strengthen its financial health, the official said. Earlier this year, the government infused Rs 10,610 crore, the highest to any public sector bank.
Out of this, Rs 7,881 crore was allotted by way of recapitalisation bonds, and Rs 2,729 cr as the direct capital infusion for FY18. It is to be noted that Finance Minister Arun Jaitley in 2016-17 Budget had announced that the government will take it forward and also consider the option of reducing its stake to below 50% in IDBI Bank. Jaitley had said that India is not ready for privatisation of PSU banks and their present characteristics will continue except for IDBI Bank. “We are trying to consolidate some of the banks, which may otherwise find it difficult in a competitive environment … In one case we are thinking of reducing the government stake to 49%, IDBI Bank,” he had said.
