Life Insurance Corporation of India is likely to retain its majority stake in state-run IDBI Bank for three to five years before lowering it.
“A time horizon of three to five years will ensure adequate time for IDBI Bank to be firmly on not only the recovery path but also to turn into a profitable organisation. Discussions on the exact time frame are still on,” said a person familiar with the development.
State-owned LIC acquired a 51 per cent stake in debt-ridden IDBI Bank, a move that was widely perceived as part of the government’s efforts to effect a turnaround of the lender’s finances.
Sources said LIC is still in discussions on the exact timeframe before it will be able submit a final proposal to the regulator, Insurance Regulatory and Development Authority of India (IRDAI). The Finance Ministry’s view is also likely to be sought.
Change in name
But an indication that the acquisition will be for a medium- to long-term period comes from the fact that the lender has also proposed a name change to either LIC IDBI Bank Ltd or LIC Bank Ltd. This will be subject to approval from the Reserve Bank of India.
However, the majority stake acquisition is against the norms stipulated by the IRDAI that insurers are allowed to hold only up to 15 per cent stake in any listed entity. LIC had received a special one-off exemption from the regulator.
IRDAI Chairman Subhash Chandra Khuntia said he has sought a timeline from the LIC on its plans to bring down its holding in the public sector bank.
“We will decide on the timeline (for stake reduction by LIC in IDBI Bank). We are not leaving it to them. I have asked them (LIC) to give a proposal, and after that we will take a decision,” he said earlier this month.
For the quarter ended December 31, 2018, IDBI Bank reported a net loss of ₹4,185.48 crore against ₹1,524.31 crore a year ago.
On Thursday, shares of IDBI Bank fell 0.23 per cent to close at ₹43.05 apiece on the BSE.
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