All eyes are now on insurance regulator IRDAI as it gets set to meet on Friday to take a call on whether or not to give the green signal to LIC’s proposed capital support or even buyout troubled IDBI Bank.

On the table are proposals that include LIC becoming a “strategic investor” without gaining management control of IDBI Bank, getting up to three board seats, and raising its stake to 40 per cent, sources said.

Another proposal is the purchase of a 40 per cent stake through preferential allotment of fresh equity shares to take the overall holding to about 51 per cent. But that would require the IRDAI’s blessing as it would lead to transfer of management control.

Even if a deal is structured in a manner where LIC does not take management control, the nod of IRDAI is a must, as the equity holding will, in any case, exceed the statutory investment cap of 15 per cent for insurers, say banking industry observers.

Currently, LIC has a 10.8 percent stake in IDBI Bank. The critical question before the insurance regulator is whether the life insurance behemoth could be allowed to raise its holding to 51 per cent in IDBI Bank in a manner where management control does not pass on to LIC.

It is a tricky situation as IDBI Bank is a company registered under the Companies Act and the definition of ‘control’ under the company law would be applied in this situation.

Also, the other issue is if the proposed transaction will be fair on LIC policyholders, who may not get a good deal from any such move.

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