Prabhadevi branch of IDBI Bank (BloombergQuint)

Timeline For LIC To Reduce Stake In IDBI Bank Will Depend On Business Model: IRDAI

The insurance regulator will set the timeline for Life Insurance Corporation of India to bring down its stake in IDBI Bank Ltd. to below 15 percent after studying the insurer’s business plan for the troubled lender.

"That (timeline) we will have to fix. That is yet to be fixed. The condition that has been put is eventually they will have to bring their stake down (below 15 percent),” Insurance Regulatory and Development Authority of India Chairman Subhash Khuntia told PTI. “How much time that will be, looking at their business plan and...we will decide."

Also read: And Finally...LIC Gets A Bank

At present, insurers are allowed to hold only up to 15 percent stake in any listed entity. But LIC, with a special dispensation from IRDAI, holds more than the limit in some state-run banks.

Last June, the IRDAI permitted LIC to pick up to 51 percent stake in debt-ridden IDBI Bank. On Dec. 28, LIC pumped in Rs 14,500 crore capital into the bank as part of its takeover, following which it injected another Rs 5,030 crore on Jan. 21.

Also read: Moody’s Upgrades IDBI Bank Ratings After LIC Infuses Capital

Replying to a query, the IRDAI chief said that in exceptional cases, the regulator may allow other insurance companies to increase their stakes beyond 15 percent.

"That will be (based) on the merit of the case. It is only for exceptional circumstances, if they can justify, they can be allowed," he said when asked if there is any bar on other companies to follow the LIC-IDBI Bank model.