LIC to own 51 percent in IDBI Bank

New Delhi : The Life Insurance Corporation of India (LIC) board has approved the insurer's attainment of a majority stake in IDBI Bank, possibly via preferential allotment of shares. Now, LIC will own 51 percent in IDBI Bank after the deal and will be the bank's largest shareholder.

The 12-member board include LIC Chairman VK Sharma and its four managing directors as members, among others.

Sources said that the deal will get complete in 3-5 months.

"The directors have approved the deal. Open offer will be one of the options and it will be completed within six months," said a senior official.

But if LIC doesn't opt for it, then it will need an exemption from SEBI as an open offer is triggered once the stake exceeds 25 percent.

LIC will help the bank to reduce its bad possessions. It will also meet the IDBI Bank board to discuss the go around strategy.

While the time for how long the life insurer will hold the stake, is left undecided and the reduction will happen only after seven years.

IRDAI had earlier approved the deal on the condition that the life insurer will gradually bring its stake in the bank down after a few years.

Economic Affairs Secretary Subhash Chandra Garg said LIC will make an open offer if necessary. However, it may not be required as public holding in IDBI Bank is low. The IDBI stock tanked over 5 percent in reaction to the news.

The motive of the deal is to inculcate capital into the bank, which is facing a severe challenge in the form of rising bad debt.

The deal will be approved only after revision by the Union Cabinet, capital markets regulator Securities and Exchange Board of India, and the Reserve Bank of India.