IRDAI may ease 15% rule to allow IDBI Bank’s acquisition by LIC

The board of India’s insurance regulator Insurance Regulatory and Development Authority of India (IRDAI) is expected to meet on Friday to discuss the possibility of easing a rule that could facilitate the sale of IDBI Bank to Life Insurance Corporation of India (LIC), according to a report by Mint.

The report, citing sources close to the development, suggests that the government is keen on selling a 43 percent stake in IDBI Bank to LIC. It will be an acquisition under the provisions of the LIC Act.

However, the Insurance Act currently bars an insurer from acquiring more than 15 percent stake in any company. The IRDAI has the authority to grant an exemption, which would be crucial in this case.

According to the report, the insurer could shell out around Rs 10,500 crore for the acquisition. This could increase LIC's total stake in the bank from the current 8 percent to 51 percent.

A listed entity, IDBI Bank is grappling with mounting toxic loans with gross non-performing assets (NPAs) rising to a staggering Rs 55,600 crore at the end of latest March quarter. During the three months, the lender's net loss stood at Rs 5,663 crore.

The bank has a market capitalisation of nearly Rs 23,000 crore while its real estate assets as well as its investment portfolio are estimated to be worth over Rs 20,000 crore.

Among its non-core assets are investments in the National Stock Exchange, IDBI Federal Life Insurance IDBI Mutual Fund, IDBI Capital Markets and National Securities Depository.