IDBI Bank shares shed 8% on report it could become LIC subsidiary

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26 Aug, 2025 12:21

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IDBI Bank's share price dropped as much as 7.7 percent intraday on Wednesday, in addition to a 6-percent loss in the previous session, after a media report indicated the lender could soon become a subsidiary of country's largest insurance company, LIC.

Sources told CNBC-TV18 the LIC board has finalised the financial conglomerate's vision to bring all financial services under one umbrella and that IDBI Bank will be a subsidiary.

LIC's subsidiaries like housing finance, MF, and pension fund are running efficiently.

Sources said IDBI Bank deal will reduce operating & distribution costs for LIC and also help it diversify & deepen the distribution. LIC customer services will be strengthened via a dedicated bank.

Global insurers have promoted banks and created a financial conglomerate. Prudential Financial & ING group are good examples, sources added.

Meanwhile, PTI recently reported quoting sources that insurance behemoth LIC is looking to enter the banking space by acquiring a majority stake in IDBI Bank as the deal is expected to provide business synergies despite the lender's stressed balance sheet.

As the government makes efforts to revive the fortunes of IDBI Bank, which is saddled with huge amounts of bad loans, LIC becoming a major stakeholder in the lender could be beneficial for both state-owned financial players, in the long run, the report said.

A listed entity, IDBI Bank is grappling with mounting toxic loans with gross non-performing assets 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 more than Rs 21,000 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 Ltd. Taking into consideration these factors, the current valuation of the bank does not reflect its "inherent fundamentals" and at this juncture, it would be a better proposition to rope in a state-owned entity as a strategic investor, the sources said.

In his Budget speech for 2016-17, then Finance Minister Arun Jaitley had said the process of transformation of IDBI Bank has already started. "Government will take it forward and also consider the option of reducing its stake to below 50 percent," he had said.

At 13:50 hours IST, the stock price was quoting at Rs 51.05, down Rs 3.45, or 6.33 percent on the BSE.