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LIC Board approves buyout of 51% stake in IDBI Bank

17 Jul 2018 | 1:17 AM

NEW DELHI:The Board of Directors of Life Insurance Corporation (LIC) on Monday cleared a proposal to acquire a majority 51% stake in capital-starved IDBI Bank through a preferential offer of shares.

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Tribune News Service

New Delhi, July 16

The Board of Directors of Life Insurance Corporation (LIC) on Monday cleared a proposal to acquire a majority 51% stake in capital-starved IDBI Bank through a preferential offer of shares.

Economic Affairs Secretary Subhash Chandra Garg, who is the government nominee on the LIC Board, said after the Board meeting that LIC already holds 7-7.5% stake in IDBI Bank and the proposal to increase the shareholding to 51% has been approved.

Garg said a preferential issue of shares by IDBI Bank to LIC will most likely be the way forward as the bank needs funds.

“The other one is that they can buy from the government but that does not provide capital to the IDBI Bank and therefore, that is the preferable mode to do it (acquire the bank),” Garg said after the meeting held here. He also said there may not be an open offer as per the SEBI regulations, as public holding in the bank is very small.

“Open offer may or may not come about. The public shareholding is very small. It is only about 5%. And the pricing formula may not be attractive. But they will go through that process and if necessary they will make that open offer, but it is not a very material issue in this context,” he said.

Garg said LIC will get the due approvals required, including from the markets regulator SEBI and the government.

A buyout by LIC is part of the turnaround strategy for IDBI Bank in which the government holds 85% stake. IDBI Bank has very high NPAs and is under the Prompt Corrective Action (PCA) of the RBI.

The move has been criticised as it involves making LIC, the largest insurance company in the country to commit funds for a stressed asset.

India Ratings had recently downgraded the long-term rating of IDBI Bank, which, it said “reflects the impairment in IDBI’s ability to sustain its current position of systemic importance, with a dip in its overall share of systemic assets and liabilities, mirroring the sharp deterioration in its asset quality”.

IDBI is the eight-largest government-owned bank and 12th largest bank, including private banks by asset market share.


To get capital support of up to Rs 13,000 cr 

  • The debt-laden bank will issue preferential shares to state-owned LIC to raise capital
  • The next step for the LIC is to approach markets regulator Securities and Exchange Board of India, as the bank, which is also state-owned, is a listed entity
  • Insurance regulator Irdai has already given its approval to the insurer for the stake purchase
  • IDBI Bank too has to get approval of its board to sell stakes to Life Insurance Corporation
  • Sources said the LIC stake buy will help the bank get capital support of Rs 10,000-13,000 crore.
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NEW DELHI:The LIC board on Monday gave approval to the insurance behemoth to acquire IDBI Bank by raising stake to 51 per cent via preferential shares, Economic Affairs Secretary S C Garg said today.

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tax advice

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Q. Please guide in respect of rebate under Section 87A. As per my understanding, this rebate is available to individual salaried persons. If so, whether the rebate is available to employees whose total income for the FY 2016-17 (AY 2017-18) is less than Rs 5 lakh or taxable income is less than Rs 5 lakh?

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