Insurance Regulator To Set Timeline For Lowering LIC’s Stake In IDBI Bank
IRDAI to decide the timeline for LIC to cut its stake in IDBI Bank.
The insurance regulator today said it will set the timeline to reduce Life Insurance Corporation of India’s stake in IDBI Bank from 51 percent to 15 percent—the prescribed limit for Indian insurers to invest in any company.
“We will look at LIC’s business plan (after acquiring a 51 percent stake) and then on that basis give them some reasonable time (to cut stake in the bank to 15 percent),” SC Khuntia, chairman at the Insurance Development and Regulatory Authority of India, told reporters on the sidelines of an insurance summit organised by Assocham in Mumbai. The regulator, he said, has allowed LIC to invest only up to 51 percent in the bank and they won’t be allowed to exceed that.
Khuntia, however, clarified that this isn’t a “blanket approval, and is specific for this case only”.
Separately, the Delhi High Court heard a petition against this deal by the All India IDBI Officers Association today. The court asked the insurer to explain whether the decision to invest in IDBI Bank was purely commercial. LIC submitted the minutes of the board meeting in which it approved the transaction. The next hearing is on Sept. 12.
The insurance regulator has replied to the court and explained that it gave relaxation to LIC as it was in the interest of their expansion, and they wanted to have synergy with a bank, Khuntia clarified.
The LIC’s board in its meeting on Sept. 4 approved increasing its stake to 51 percent in the state-owned bank and finalised timelines for the process, Subhash Chandra Garg, secretary, Department of Economic Affairs and member of the LIC board, had then said.
IDBI Bank Managing Director B Sriram earlier said that in the first tranche of the deal, LIC had given an in-principle nod to increasing its stake to 15 percent from 8 percent in the bank, as no regulatory approvals are required for that.
The insurer is yet to seek an approval from the Securities and Exchange Board of India on whether it will be required to make an open offer. Any investor breaching the 25 percent shareholding norm has to make an open offer to minority stakeholders, according to the market regulator. The Reserve Bank of India’s approval is also required for the transfer of majority ownership to LIC.