LIC to get a bank as IRDAI gives nod for 51% stake in IDBI
Life Insurance Corporation of India (LIC) is looking forward to a long-term desire to set up its own bank. The Insurance Regulatory and Development Authority of India (IRDAI) has agreed to the Life Insurance Corporation (LIC) of India’s proposal to hike its stake to 51 per cent in IDBI Bank from 10.8 per cent at present. The permission is subject to the corporation bringing down its holding to 15 per cent in future.
“LIC would have to invest Rs.10, 000-13,000 crore to buy a controlling stake in the bank, “the sources said. No insurance company is permitted to buy more than 15 per cent share in any company so far. Now, the IRDA exempted this to LIC. The market regulator SEBI and the Reserve Bank of India (RBI) have also accepted the proposal further.
Insurance companies, which are competing with LIC in public and private sectors, own banks. But LIC does not have own bank. Thought it has 5% stake in public sector banks it does not have a self-controlled bank. Lic holds about 9.98 % stake in State Bank of India and in Allahabad Bank 12.37 per cent and Corporation Bank at 13.03 per cent. “If you get a controlling stake in a bank, it will become your subsidiary. When you have a bank, you can not have more than 5 per cent stake of other banks. Therefore, if the special exemption is not received, LIC will definitely have to cut share in other banks, “sources said. As soon as the deal is settled with IDBI Bank, LIC representatives will join the bank board.
The government has 80.96 per cent stake in IDBI Bank whereas LIC has 10.8 per cent stake. The market value of the company rose to Rs 22,954.79 crore and the share price rose10% to Rs 54.90 per share.
All Indian Bank Employees chief secretary CH. Venkatachalam wrote a letter to Finance Minister Piyush Goyal opposing the proposal to sell the majority of shares in IDBI Bank to LIC.