Insurance regulator Irdai will allow IDBI Federal Life Insurance to continue with its existing promoter IDBI Bank even after the Life Insurance Corporation (LIC) has picked up 51 per cent in the bank, an Irdai official said on Thursday.
The Irdai Act does not permit one promoter having two licenses as the LIC, which acquired 51 per cent in IDBI Bank through multiple deals, is also the promoter of IDBI Federal Insurance.
However, a top official of the Insurance Regulator and Development Authority of India (Irdai) has clarified that the insurance regulator will ask LIC to bring its stake below 51 per cent, though no time frame has been decided about it, and the Corporation can hold majority stakes in IDBI Federal Life Insurance for the time being without violating the existing regulations.
“LIC, with its higher stake in IDBI Bank, is still an investor and not a promoter of the bank, as we will ask LIC to lower its stake in IDBI Bank from 51 per cent. We have not decided how much time we would allow LIC to lower its stake in IDBI Bank,’’ the official said on the sidelines of a reinsurance seminar here.
Earlier, IDBI Bank had informed the stock exchanges that on January 21, LIC completed acquisition of 51 per cent and controlling stake in IDBI Bank.
The IDBI Bank Board has also approved reclassification of LIC as promoters of IDBI Bank in terms of the shareholder’s resolution passed on November 7, 2018 to this effect.
Irdai had, in June last, relaxed norms for LIC to make the acquisition of IDBI Bank.
It is expected that the insurance regulator will soon give a timeline to the state-owned insurer to bring back its shareholding in IDBI Bank to 15 per cent from 51 per cent.
Earlier, IDBI Bank had made efforts to exit IDBI Federal Life Insurance by selling its stakes but could not find a suitable buyer which was prepared to offer the price it wanted. IDBI Federal Life is a three-way joint venture between IDBI Bank, Federal Bank and Belgian insurer Ageas.
IDBI Bank, which owns a 48 per cent stake in the insurer (the other two hold 26 per cent each), was keen on selling its stake for about Rs 3,000 crore to help clean up its balance sheet. Companies including Max Life Insurance, Birla Sun Life and Exide Life Insurance were reported to have shown an interest in the sale.