LIC-IDBI Bank deal: What may be discussed in IRDAI meet today

Amid reports that insurance behemoth LIC is likely to pick up a majority stake in the state-run IDBI Bank, the board of insurance regulator IRDAI will meet on Friday. The meeting may see discussion on issues such as hike in investment limit for a particular insurance firm beyond 15 percent in the interest of policyholders, PTI reported. An insurance firm can’t hold over 15 percent stake in the listed financial companies currently, according to existent norms. “In the case of entities from the financial sector, other than regulated or diversified or listed, the limit (for insurance companies) shall be at 15 percent of the paid-up capital,” as per the guidelines for listed Indian Insurance Companies, 2016.

In 2017, the insurance regulator had asked state-run life insurance company to prepare a road map to pare its stake to 15 percent in firms where it breaches this ceiling without fixing a time-frame.

It was on June 21 that reports were out in media that the state-owned Life Insurance Corporation could pick up a large stake to become a strategic investor in IDBI Bank as the government looks to disinvest its equity holding in the lender. The reports also stated that the finance ministry has held discussions with LIC to explore the possibility of LIC raising its stake in IDBI Bank to 51 percent from a little over 10 percent at March-end.

As per LIC’s internal estimates, the deal may cost around Rs 10,000 crore. Even as discussions have been held in this regard, LIC is expected to take the proposal to its board for approval only after getting a clearance from the finance ministry, government sources said. While the government has explored the possibility of LIC raising its stake up to 51 percent in the lender, the deal is not final yet and the finance ministry may chose to sell its stake in IDBI Bank to a clutch of investors including the LIC, PTI had reported.

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