By Express News Service
MUMBAI: Decks are cleared for Life Insurance Corporation of India (LIC) to acquire up to 51 per cent stake in IDBI Bank, with its board allowing the insurer to add banking as a side hustle. Before that, LIC will need to get approvals from IDBI Bank board, the Union Cabinet and the Reserve Bank of India besides pumping over Rs 12,000 crore into the lender possessing the worst toxic assets among public-sector banks. The IDBI Bank board is likely to meet on Tuesday to take a call on the matter.
The deal is a feast for IDBI Bank, which is about to blow its top due to capital starvation, but the jury is still out on LIC’s decision to bail out the troubled bank. “IDBI is a zombie bank and policyholders’ money can’t be put under such risk. LIC has become a go-to entity for all PSU IPOs… This should stop,” said Shriram Subramanian, founder, InGovern Research Service, proxy advisory firm.
LIC remained zip-lipped on the proposed deal, but officials insist policyholders need not panic as it has been a long-term investor with an average holding period of 10 years and also because its investments rarely fail.
“The investment strategy works much like a mutual fund with a basket of products to mitigate risk,” said a senior official taking comfort in LIC’s asset base of Rs 22 lakh crore. Strengthening his viewpoint is LIC’s profits from sale of investments that shot up 33 per cent to Rs 28,527 crore in FY18, against Rs 21,503 crore in FY17, higher than the Sensex’s return of 11.30 per cent in FY18.
