Taking forward the proposal of the Life Insurance Corporation(LIC) to acquire 51 per cent in the public sector lender, IDBI Bank, the latter is seeking an approval from the government.
"The bank has received a letter dated July 16 from LIC expressing their interest in acquiring 51 percent controlling stake in IDBI Bank as a promoter through preferential allotment of shares/open offer. Bank's board in its meeting held on Tuesday has considered the above letter and decided to seek government's decision in this regard," said IDBI Bank in a statement to the exchanges.
The LIC, whose board approved the deal on Monday, holds 7.98 percent stake in the bank at present and will buy additional 43.02 percent in former in terms of preferential shares once it gets the approval from the Cabinet.
"The board met today (Tuesday) and conveyed the interest of LIC to hold 51 percent stake in IDBI Bank. We will take a final decision once the government gives its go-ahead," said B Sriram, MD & CEO, IDBI Bank.
Sriram said that the mode of acquisition is still being discussed and the investment amount will be decided post that.
Sriram said that LIC will hold controlling stake and will also make some capital infusion into the bank. With respect to their life insurance subsidiary, IDBI Federal Life, Sriram added that a decision on its sale will be taken at a later stage.
LIC's board and the Insurance Regulatory and Development Authority of India (IRDAI) have already given green signal to the deal.
After the government's approval, the deal will also need a go-ahead from Reserve Bank of India (RBI) and also Securities and Exchange Board of India approval.
"The government has said that it will be behind every bank for their capital requirements," Sriram added.
RBI's nod will be required to make a change in the promoter status once LIC is the single largest shareholder.