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  • 4 important things to know about the LIC-IDBI bank deal

    Publish Date: 17th July, 2018

    The board of India’s biggest life insurer: Life Insurance Corporation (LIC) approved a proposal to acquire a majority stake in IDBI Bank yesterday. Here is everything you need to know about this takeover:

    1)   Details of the deal
    As of 30 June, LIC held a 7.38% stake in IDBI Bank. According to the deal, LIC plans to buy 43% more to take a majority control in the bank.

    2)   Relief for the cash-strapped PSU bank
    The debt-ridden state-owned bank would get a much-required capital support of Rs 10,000-13,000 crore. The bank is struggling with gross Non-Performing Assets (NPAs) rising to around Rs 55,600 crore in March 2018, according to a report by Business Today. Read more about bank NPAs here. In addition to the massive cash injection, the bank would get access to about 22 crore policyholders.

    3)   LIC’s interest in banking
    The insurance company has been looking to enter into the banking space for a while. This would now be possible through IDBI Bank. The company will now get access to around 2,000 branches. Banks are large distributors of financial products including insurance.

    4)   An issue of preferential shares
    The most likely option for LIC is to increase its stake in IDBI through the preferential share route. The combined shareholding of the government and LIC would be greater than 90%. With public shareholding too low, there may not be an open offer, according to Subhash Chandra Garg, Secretary of the Department of Economic Affairs.


    The deal allows LIC to enter into the banking space and provide business synergies. As for IDBI Bank, it would receive a large capital inflow. While the deal has been approved by the LIC board, it still needs to be approved by the Union Cabinet, market regulator SEBI and central bank RBI. At the end of the trading day, IDBI Bank’s stock price fell by about 2%.

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