Currently, IDBI Bank is in talks with investors, including LIC, to raise Rs 10,000 crore capital by the end of second quarter.
Life Insurance Corporation of India (LIC), which infused Rs 21,600 crore while buying a 51 percent stake in IDBI Bank , is now reluctant to infuse more capital in the lender.
Sources told Moneycontrol that the life insurer may agree to give only a small portion of funds since it has already infused more than Rs 21,000 crore in Q3FY19. LIC is also selling its insurance policies through the bank's branches to boost its fee income.
LIC did not respond to a query sent by Moneycontrol.
For the June quarter, IDBI Bank posted net loss of Rs 3,800 crore compared to a loss of Rs 2,410 crore in the year-ago period.
The net interest income (NII) of IDBI Bank was down 11.1 percent at Rs 1,458 crore against Rs 1,639 crore.
On the other hand, the bank's gross NPA was up 160 bps to 29.1 percent against 27.5 percent, while net NPA decreased 210 bps to 8 percent against 10.1 percent, QoQ.
"Capital infusion has already been made since the December quarter (FY19). It is to be seen what strategic growth plans the bank has and how much can LIC commit," said a source close to the development.
Currently, IDBI Bank is in talks with investors, including LIC, to raise Rs 10,000 crore capital by the end of second quarter. This is to meet minimum regulatory requirements, the bank's MD & CEO Rakesh Sharma said after announcing April-June results on August 14.
This includes a Rs 1,500 crore to be realised by sale of non-core assets, Sharma added. The bank has received binding bids for stake sale in its mutual funds subsidiary, while the process is on for monetising investment in IDBI Federal Life Insurance.
An immediate sale in IDBI Federal Life would have allowed the bank to unlock capital. In May 2018, while IDBI Bank was close to a stake sale in the life insurance company this deal could not be completed due to valuation concerns. Now with LIC as the majority shareholder, the stake sale process has to begin afresh.Meanwhile, LIC also may get 10-12 years before it is made to reduce its stake in IDBI Bank to 15 percent. The insurance regulator, had in June 2018, given conditional approval to the deal, mandating that LIC would eventually bring down its stake to the 15 percent cap applicable to life insurers.The Great Diwali Discount!
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