State-owned LIC, promoter of IDBI Bank, has said it plans to retain a part of its stake in the lender to harness the benefits of the bancassurance.
Along with the government, Life Insurance Corporation (LIC) will also divest its stake in IDBI Bank but may not exit completely, LIC Chairman Siddhartha Mohanty told PTI in an interview.
“We have made it clear that IDBI Bank is our number one partner in bancassurance. We will retain the some stake in IDBI Bank so that the bancassurance partnership continues,” he said.
The government, which owns over 45 per cent stake in IDBI Bank, and life insurance behemoth LIC, with a 49.24 per cent shareholding in the lender, have jointly decided to sell a 60.7 per cent stake.
IDBI Bank became a subsidiary of LIC with effect from January 21, 2019, after the acquisition of an additional 82,75,90,885 equity shares.
On December 19, 2020, IDBI Bank was reclassified as an associate company due to the reduction of LIC shareholding to 49.24 per cent, following the issuance of additional equity shares by the bank under a qualified institutional placement (QIP).
IDBI Bank has been the strongest contributor to the bancassurance channel, he said, adding for the bancassurance arrangement to continue, LIC may not be required to hold the entire stake.
Bancassurance is an arrangement between a bank and an insurance company, allowing the latter to sell its products to the bank’s customers and others through the branch network. Earlier this month, Department of Investment and Public Asset Monetisation (DIPAM) Secretary Tuhin Kanta Pandey said the stake sale in IDBI Bank may not be completed by March 2024.
The transaction is “on course”, but there are aspects like the RBI’s fit and proper criteria, which need to be complied with, Pandey said, adding, “We practically don’t think that before March, we can conclude it (IDBI Bank stake sale)”.
About the concerns of shareholders on the low price of LIC shares post-listing, Mohanty said, “We are very much concerned about the interest of our shareholders and taking steps to create margin by adopting various means, including by changing product mix”.