The recent news came up from LIC. Life Insurance Corporation of India today finalize the decision of buying 51% stakes of IDBI bank. A few days back IDBI bank offers to buy their 51% of the stakes.
The primary reason behind this offer of IDBI bank is, it’s the government-controlled bank which needs capital. For raising such capital, IDBI preferred an option for selling their maximum stakes. Before this offer government is having 86% stakes in IDBI bank. After LIC stakes of government are accepting the offer is reduced to 49%.
Apart from this, along with reducing the stakes of government in IDBI bank. Controlling power is also now shifted to the Life Corporation of India.
Statement of Subhash Garg
Subhash Garg who is the Secretary at the Department of Economic Affairs stated that the bank needs capital urgently for carrying on all the expenses. Bank has one option of raise funds from government, but they opted for selling the 51% stakes to LIC,
Apart from this Garg also said that the ratio of a shareholder from the general public is too low for the bank.
After the approval of the LIC to buy the 51%. Now the decision is in the hands of IDBI bank to go with selling the stakes or not. For taking any decision, IDBI bank may soon call their directors for investment meeting.
Board of insurance permits LIC to increase their stakes. Currently, LIC is having 10.82% stakes in IDBI bank. The deal also required the NOD from the central bank of India and government of India.
According to the reports, the bank has owned 55,600 crores of the loan. This massive amount of loan is now put under bad loans in the first quarter of 2018.
According to the reports of ICRA, it was found that 36% of the total loan is under the bad loans. Bank need necessary capital to bear this tremendous amount of loan. Paying this loan with sales and the noncore asset is possible.
Apart from this LIC had not disclosed anything about the amount of capital they may infuse in the bank. However, some reports secretly suggest that LIC is planning to infuse 13000 crores in IDBI bank.
Srinivasan who is the official of the Bank said, the rating of the bank is constant due to regular infuse of capital from LIC.