Responding to concerns of “hard earned money of the LIC policy holders sinking” in the deal, finance minister Piyush Goyal said it was LIC that came up with the proposal after hearing that the government wants to bring down its stake in IDBI Bank.
“Union Finance Minister, in his Budget speech (2016), had announced: ‘The process of transformation of IDBI Bank has already started. Government will take it forward and also consider the option of reducing its stake below 50%.’
“Against this background, after approval of LIC’s Board, LIC submitted a proposal..to the Insurance Regulatory and Development Authority of India for acquiring controlling stake in IDBI Bank Ltd,” Goyal said in the Lok Sabha.
At present, the deal is pending approval by the government, he added.
“After consideration of LIC’s offer by the Board of IDBI Bank Limited, the bank has sought Government’s decision in the context of Government’s stake coming down below 51% as a result of the proposed acquisition. The matter is under Government’s consideration,” he said.
Goyal was also put a question on how long the deal will take, to which he replied: “Since the matter is under consideration..the question does not arise at this point of time.”
IDBI Bank has high levels of debt due to the failure of the bank to recover money from its corporate clients, and the government, as the majority investor, is keen to get out of the entity.
However, the deal has come in for criticism for allegedly endangering the money of insurance policy holders, whose corpus will be used to finance the transaction.
The deal has, however, got the approval of both the insurance regulator as well as the central bank.