Life Insurance Corporation of India's (LIC's) board has approved acquiring up to 51 per cent stake in state-run IDBI Bank, Economic Affairs Secretary Subhash Chandra Garg told reporters on Monday.
Garg, who is on the board of state-run LIC, said the additional stake buy would be most likely through a preferential shares issue, enabling injection of funds to IDBI Bank.
Now LIC will approach markets regulator Sebi. Insurance regulator Irdai has already given its approval to the insurer for the stake purchase.
Garg also said if required LIC will make an open offer.
LIC owned about 8 per cent of IDBI Bank as of end-June, while the federal government owned 86 per cent.
LIC stake buy will help the debt-ridden state-owned bank get a capital support of Rs 100-130 billion.
LIC has been looking to enter the banking space by acquiring a majority stake in IDBI Bank as the deal is expected to provide business synergies despite the lender's stressed balance sheet.
It will get about 2,000 branches through which it can sell its products, while the bank would get massive funds of LIC.
The bank would also get accounts of about 22 crore policyholders and subsequent flow of fund.
Once the deal goes through, IDBI Bank, which is grappling with mounting toxic loans with gross non-performing assets rising to a staggering Rs 556 billion at the end of the March quarter, will get much-needed capital support to revive its fortune.