LIC board will meet on Tuesday to decide on the modalities for increasing stake in debt-ridden IDBI Bank to 51 per cent, a move that will provide the insurance behemoth entry into the banking space.

According to sources, the board will discuss the timeline for the open offer, board-level appointments and future strategy for revitalising IDBI Bank. It will also authorise Life Insurance Corporation of India to appoint a merchant banker and a legal advisor to carry out the acquisition process.

The board will also ask the insurer to do due diligence of the bank and then proceed for various regulatory clearances.

Meanwhile, LIC is in the process of picking up additional 7 per cent stake in IDBI Bank through preference shares. With this, its total holding in the bank would rise to 14.9 per cent. At present, LIC holds 7.98 per cent stake in the public sector bank.

The stake hike will help the lender to meet the intimidate capital requirement that will enable IDBI Bank to meet the regulatory norms at the end of second quarter. In August, the Union Cabinet had approved LIC’s proposed acquisition of up to 51 per cent stake in debt-ridden IDBI Bank.

The bank, in which the government holds 85.96 per cent stake, had posted a net loss of Rs 2,409.89 crore in the quarter ended June 2018. It had posted a gross non-performing asset (NPA) of about Rs 57,807 crore.

The Insurance Regulatory and Development Authority of India board, at its meeting held in Hyderabad in June, had permitted LIC to increase its stake from 10.82 per cent to 51 per cent in IDBI Bank. As per current regulations, an insurance company cannot own more than 15 per cent in any listed financial firm.

LIC has been looking to enter the banking space by acquiring a majority stake in IDBI Bank as the deal is expected to provide business synergies despite the lender’s stressed balance sheet. With the culmination of the deal, LIC will get about 2,000 branches through which it can sell its products, while the bank would get massive funds of LIC.