INSUBCONTINENT EXCLUSIVE:
argument that it is a long-term investor in the struggling bank which had nearly 30 per cent of its advances as bad loans in the December
Two people aware of the development said that RBI, which classified IDBI as a private sector bank last month, has given LIC 12 years to cut
next few years or so and would probably invest more money to retain its stake in any future fund raising by the bank.
The insurance
But the Insurance Regulatory Authority of India (Irdai) allowed LIC to invest up to 51 per cent in IDBI Bank last year
The regulator also did not insist publicly on a deadline for LIC to cut its stake in Corporation Bank when it invested more than 10 years
LIC invested 21,624 crore additional capital to take the stake up to 51 per cent from 14.5 per cent
Now, depending on the plan approved by the board, LIC will invest additional capital.
IDBI Bank proposes to have a 15-member board with two
representatives from LIC and the LIC chairman is the non-executive chairman of the bank
As part of the turnaround plan, IDBI Bank has put on block its insurance and mutual fund businesses to increase the capital base.
The
government is the other major investor in IDBI Bank owning 46.46 per cent while the rest is with the public.
IDBI Bank is under the prompt
corrective action framework of the RBI
For a bank to come out of PCA, it has to report profit and its net NPA should be below 6 per cent
One it comes out of PCA, the bank will require growth capital
The provision coverage ratio of the lender has improved to 75 per cent but it may have to provide more because of aging provision
The bank board has approved raising 4,000 crore through Tier II capital.
