LIC has no plans to own IDBI bank, will exit in phases, says IRDA member
Life Insurance Corporation's (LIC) controversial plan to buy up to 51 percent in debt-laden IDBI Bank has been cleared by Insurance Regulatory and Development Authority (IRDA), a member of the insurance regulator told CNBC-TV18.
Life Insurance Corporation's (LIC) controversial plan to buy up to 51 percent in debt-laden IDBI Bank has been cleared by Insurance Regulatory and Development Authority (IRDA), a member of the insurance regulator told CNBC-TV18, adding that the insurance company has no plans to own the state-run bank and will make a phased exit.
IRDA on June 29 has cleared the proposal by LIC, also owned by the government to acquire a significant stake in IDBI Bank.
"LIC will not be allowed to hold a stake in IDBI Bank over the mandated limit of 15% till eternity and will have to bring it down in a time-bound manner," said IRDA member, Nilesh Sathe.
Amid debate over LIC's investment in IDBI Bank, various stakeholders including policyholders and employees of the insurance company are worried about the investment in a bank, which is weighed down by huge bad loans and losses.
In an exclusive interview to CNBC-TV18, he said that past experience of LIC’s investment decisions did provide the regulator some comfort that the deal with IDBI Bank will be beneficial for LIC's policyholders.
However, Sathe said there were various conditions under which the maiden regulatory approval was granted.
Sathe dismissed reports that suggested LIC intends to own IDBI Bank.
He said the deal between LIC and IDBI Bank is not a part of the government’s divestment plan. In other words, IDBI Bank will use funds raised from the transaction to restructure its assets.
LIC currently holds 11 percent stake in IDBI bank and its total stressed portfolio is 35.9 percent of total loans. The gross non-performing assets at the end of March quarter stood at Rs 55,588 crore.
IRDA is in constant touch with other regulators like Securities and Exchange Board of India (Sebi) and Reserve Bank of India (RBI) on the LIC-IDBI Bank transaction, according to him.
Highlighting the synergies that the deal will bring to LIC, Sathe said the bank branches will significantly strengthen LIC’s bancassurance network, taking it a step closer to becoming a leader in that distribution space.
LIC can also use IDBI Bank’s 2,000 branches to sell its products.
This is the best time for LIC to acquire a stake in IDBI Bank as the valuations were at their lowest level making the deal an attractive proposition, Sathe added.
First Published: Jul 10, 2018 7:30 PM IST
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