The board of Life Insurance Corporation of India (LIC) has given its final nod to buying of 51 per cent stake IDBI Bank, said Subhash Chandra Garg, Secretary, Department of Economic Affairs.
As of now, the insurer holds 7.5 per cent stake in LIC and will be acquiring the remaining stake from the government, said Garg.
He added that in most probability the public lender will issue preference shares to LIC to complete the deal.
“Using this route rather than LIC directly buying the government’s stake in IDBI Bank will ensure that the bank receives the capital,” Garg added.
The Secretary cleared that open offer for this deal may not be required as public the shareholdings in IDBI Bank is very small at 5 per cent. LIC will go through the entire and will check the feasibility and make the offer open if necessary. The pricing of the deal will rely on the formula of the preference share issuance.
The government holds 85.96 per cent stake in IDBI Bank. It was first reported in June 2018 that the centre is looking for financial institutions like LIC to take stake in IDBI Bank and then let a professional board run the bank.
The centre has been trying to denationalise IDBI Bank for several years in the wake of the rising menace of Non-Performing Assets (NPAs). The bank’s loss grew to Rs 8,237 crore in the fiscal year ended 31 March from Rs 5,158 crore in the previous year.
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