Mumbai: The sale of IDBI Bank has moved a step closer after the Securities and Exchange Board of India (Sebi) approved the reclassification of Life Insurance Corporation of India (LIC) from a promoter to a public shareholder, once the privatisation deal is completed.
Sebi’s Conditions
The market regulator’s approval comes with specific conditions:
- LIC’s voting rights will be capped at 10%.
- LIC will not have any board representation or control over the bank’s affairs.
- LIC must reduce its stake to 15% or below within two years of the deal’s closure, as directed by the Reserve Bank of India (RBI).
This follows the Cabinet’s 2021 nod for strategic disinvestment in IDBI Bank, conveyed through the Department of Investment and Public Asset Management (DIPAM).
LIC’s Role and Future Stake
LIC chairman R. Doraiswamy recently told TOI that the corporation intends to retain a meaningful holding even after the sale. “We acquired up to 51% of IDBI Bank because their recapitalisation need provided us an opportunity. We are now at 49.2%. The government and LIC will jointly offload part of our stake during privatisation, but we will retain a significant holding post-sale and continue the relationship,” he said.
Interest From Global Players
Speculation around potential buyers has grown, especially after Emirates NBD received an RBI licence to set up a wholly owned subsidiary in India, sparking rumours of its interest in acquiring IDBI Bank.
Background: LIC’s Takeover of IDBI Bank
In January 2019, LIC acquired a 51% controlling stake in IDBI Bank for about ₹21,624 crore to rescue the lender, which was struggling with bad loans and weak capital buffers. The move gave LIC access to IDBI’s branch network for insurance distribution, while providing the bank with critical capital support.
Following the acquisition, the RBI reclassified IDBI Bank as a private sector lender. While asset quality challenges remain, the deal marked one of the biggest state-backed interventions to stabilise a troubled financial institution.
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