New Delhi : The country's largest life insurer Life Insurance Corporation (LIC) may propose a timeline of 3-5 years for cutting down its stake in the recently acquired IDBI Bank to comply with insurance regulator Irdai's norm of 15 per cent stake in a listed investee firm.
Investment returns at right price will the hold key for the LIC to pare its stake in IDBI Bank. Also, the market conditions have to be right.
Cutting down from a high of 51 per cent stake will take longer and cannot be done in months, sources said, adding that the same may be conveyed by the LIC to the Insurance Regulatory and Development Authority of India (IRDAI). The decision is yet to reach finality, they saidIrdai has sought proposals on such a timeline from the LIC management for reducing its stake in IDBI Bank. The regulator's direction on timeline can impact IDBI Bank's stock prices, which is the reason it wants the LIC to propose a time period for stake reduction on which the regulator will take a call
At present, the permissible limit for an insurer to hold stake in any listed entity is 15 per cent. But the LIC, with special dispensation from Irdai, holds more than this in some state-run banks like the Corporation Bank.
Recently, IRDAI Chairman Subhash Chandra Khuntia had said: "We will decide on the timeline on the LIC paring its stake in IDBI Bank. We are not leaving it to them. I have asked them to submit a proposal and after that we will take a decision .LIC holds 51 per cent stake in IDBI Bank under a specific permission from Irdai, but under the condition that it will bring it down
LIC had announced the completion of the acquisition of 51 per cent controlling stake in the near crippled IDBI Bank, which made it the majority shareholder of the bank in January this year.