Indian state-owned insurance group and investment company LIC (Life Insurance Corporation) has decided to pick up a further 7% stake in the government lender IDBI Bank through a preferential issue. LIC already holds a stake in the bank which is equal to 7.98% and it is moving towards acquiring more of it.
Lately, IDBI Bank’s capital adequacy ratio fell largely to 8.18% as on June end, below the regulatory requirement of 9%. This move, however, will help the lender to improve its capital adequacy ratio.
“It is advised that the bank has received a letter dated August 28, 2018 from Life Insurance Corporation of India giving their in- principle approval for subscription of the equity shares on preferential basis subject to their total exposure not exceeding 14.90% of post-issue capital of IDBI Bank at any point of time,” IDBI Bank stated.
It has also been stated that LIC would need insurance regulator’s approvalto pick up more than 15% stake in any organization. Thus, it has been reported that though the Insurance Regulatory and Development Authority of India (IRDAI) had given it’s in-principle approval to LIC to pick up 51% stake,the final approval from the regulator may take some more time.
For the purpose, the board of IDBI Bank would be meeting on August 31 to look into the proposal and arrive to a decision.
“The board of IDBI Bank at its meeting to be held on August 31, 2018 will consider the proposal for seeking shareholders’ approval,” IDBI said.
Talking about the financial details, IDBI Bank had witnessed an increase in its loss to ₹2,410 crore for the first quarter of the current financial year mainly due to higher provisioning for bad loans. Gross non-performing assets (NPAs) raised to ₹57,806.84 crore, or 30.78%, of total advances, in the April-June quarter of 2018-19. Prior to this, it was ₹50,173.20 crore, or 24.11%, in the year-earlier period.