LICI Permitted To Help Out Stressed IDBI By Picking Up 51 per cent Stakes

LIFE Insurance Corporation of India has received nod to come to the rescue of the Mumbai headquartered debt ridden IDIBI Bank by buying it’s as much as 51 per cent stake. Government considers that it is more than a Himalayan task to go on investing in it for the benefit of the clientale across the country. The Board of Directors of Insurance Regulatory and Development Authority of India (IRDAI) met Hyderabad on Friday and permitted LICI to go ahead with acquiring the proposed 51 per cent stake as against the current 11 per cent stake in the bank. The permission is subject to the LICI bringing down its holding to 15% in future. The grow mounting non –performing assets of IDBI have reportedly gone up to about 560 billion INR causing concern to the banking sector and the government. The Bank was established in 1964 by an Act of Parliament as a wholly owned by the Reserve Bank of India only to provide credit and other financial facilities for the development of the fledgling Indian industry. IDBI Bank has the highest  bad loans  among  the banking  sector accounting  for close to 228 per cent advances  and  posted loss of 5,666 crore last year. Considering this factor, The Board of the insurance regulator took up the LICI-IDBI issue as a special case. As soon as the news was flashed by TV channels that IRDAI was most likely to okay capital infusion by LICI in the in the struggling bank,  IDBI Bank’s shares jumped up on Dalal Street . The Economic Times says the capital infusion by LICI may be more than Rs 9,000 crore in one or more tranches. This will provide a breather to the bank and give it the means to address some of its biggest problems, ET says adding after LICI picks up 51 per cent stakes in IDBI the Government’s stake will proportionately come down to around 40% from 70%.LIC needed an exemption from relevant provisions in the Insurance Laws (Amendment) Act, 2015, and the Life Insurance Corporation Act, 1956, that bar insurers from holding more than 15% in any company. Even Section 35 of the Insurance Act restricts a life insurer from acquiring control in a non-insurance entity. The additional stake would cost LIC more than Rs 9,000 crore. While it was reported that LIC could infuse Rs 13,000 crore into IDBI Bank (with mage & inputs from ET)

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