The government-owned Life Insurance Corporation of India (LIC) seems all set to acquire a majority stake in IDBI Bank very soon.
LIC has approached Insurance Regulator IRDA (Insurance Regulatory and Development Authority) earlier for their approval and now they have apparently got the clearance from banking regulator RBI (Reserve Bank of India too).
Now since LIC is keen to acquire a controlling stake of more than 51% in IDBI, hence it would require cabinet approval as well.
Founded in 1956, LIC has been playing an instrumental role in not only the insurance vertical but the entire financial markets & economy.
As a part of its investment asset management, LIC invests in many other companies. In the Banking sector alone, LIC commands significant stake in many government run banks such as State Bank of India (SBI), Punjab National bank (PNB), Bank of Baroda (BOB), Syndicate Bank, Corporation Bank, Canara Bank, Oriental Bank of Commerce (OBC), Union Bank of India, UCO Bank. Among the private banking players, LIC has stakes in the leading names ICICI Bank, HDFC Bank, Axis Bank, Yes Bank.
IDBI Bank, on the contrary, has been under tremendous pressure from the government and RBI on account of poor performance, increasing NPAs & alleged bank frauds.
RBI has been keeping IDBI bank under Prompt Corrective Action (PCA) framework for quite some time, by which RBI aims to fix the operational and audit systems in place so as to strengthen IDBI business.
After LIC increases its stake to more than 51%, in IDBI, LIC will bring an open offer and is expected to pump in more than INR 100 billion thru equity.
As a client, if you have your banking relationships with IDBI Bank, such as Savings Account, Fixed Deposits, Recurring Deposits, Loans etc, you need not worry. IDBI bank is very much going to be there, safe & sound.
The controlling hands would change, management will change and the change would be for the better. take-over