This step was taken in response to the life insurer’s argument stating that it is a long-term investor in the debt ridden bank which had nearly 30 percent of its advances as bad loans in the December quarter.
Sources suggest that RBI, which classified IDBI as a private sector bank last month, has granted LIC with 12 years to cut its stake in the bank by 10 percent.
“RBI has stipulated that after 12 years LIC has to reduce stake in IDBI Bank by 10 per cent to 40 per cent,” said a source.
“LIC will take a view on how they are able to divest it,” added the source.
The development indicates that LIC would no longer be under any obligation to sell its stake in the upcoming years or so and would probably invest higher money to maintain its stake in any future fund raising by the bank.