Both entities will also undertake rationalisation of the common subsidiaries in mutual funds and life insurance arms, as per the strategy. In January 2019, the Life Insurance Corporation of India (LIC) completed the process of picking up a controlling stake of 51 percent in the IDBI Bank.
IDBI Bank has been categorised as a private sector bank (PSB) following acquisition of majority stake by Life Insurance Corporation, RBI said. In January, LIC completed the process of picking up a controlling 51 per cent stake in the nearly crippled IDBI Bank.
Both entities will also undertake rationalisation of the common subsidiaries in mutual funds and life insurance arms, as per the strategy.
In January 2019, the Life Insurance Corporation of India (LIC) completed the process of picking up a controlling stake of 51 percent in the IDBI Bank. The deal concluded after the approval of the Union Cabinet on August 1, 2018.
The Cabinet also approved reduction in Government shareholding in IDBI Bank Limited to below 50 percent by dilution.
The acquisition was done through preferential allotment or open offer of equity and through relinquishment of management control by the Union Government.
The IDBI Bank is currently under the Prompt Corrective Action (PCA) framework of RBI that bans it from corporate lending, branch expansions, salary hikes and other regular activities. The entry of LIC is likely to solve the capital issue through the infusion of funds.
• The acquisition would help financially strengthen the LIC and the bank as well as their subsidiaries which offer financial products such as housing finance and mutual funds.
• The IDBI bank will get an opportunity to tap over 11 lakh LIC agents for doorstep banking services, positioning it to improve customer services and deepen financial inclusion.
• The bank would also be benefitted in terms of lower cost of funds through acquisition of low-cost deposits and fee income from payment services.
• LIC would get bancassurance (selling of insurance products by bank) through the bank’s network of 1916 branches, besides access to bank’s cash management services.
• LIC would gain in terms of furthering the realisation of its vision of becoming a financial conglomerate.
• The acquisition has wide-ranging synergy benefits for customers of the LIC and the bank. Customers will get access to wider offerings of financial services under one roof, and LIC being better positioned to expand life insurance coverage.