IDBI Bank wil continue functioning independently without much intervention from Life Insurance Corporation (LIC) of India, which is set to become its largest shareholder.

Sources said that LIC is not planning to be directly involved in the day to day running of the public sector bank and the lender will continue to be professionally run. LIC will however, have representatives on the Board of the Bank.

“LIC does not have the necessary experience in running a Bank and will leave it up to the professionals,” said a person familiar with the development, pointing out that IDBI Bank has just got a new Managing Director and CEO.

However, with the lender becoming a subsidiary of the insurer, LIC Chairman VK Sharma is likely to become the Chairman of IDBI Bank as well.

The state owned life insurer is in the process of acquiring 51 per cent stake in IDBI Bank. The move is expected to help infuse between ₹10,000 crore to ₹13,000 crore in the lender, which has non-performing loans totalling ₹55,588 crore by March 2018 and is under the RBI’s Prompt Corrective Action rules.

LIC is planning to acquire about 204 crore shares of IDBI Bank, constituting 26 per cent of the bank’s fully diluted equity share capital, as part of an open offer process through an open offer between December 3 and December 14.

Sources said that LIC is confident that as a majority shareholder its investments in the debt ridden lender will not be impacted.

As of now, it has not set a timeline from insurance regulator Insurance Regulatory and Development Authority of India to cut down its stake to the mandated 15 per cent in IDBI Bank.

“We are not working based on a timeline to lower our stake. It is still early days,” said the person.

IDBI Federal Life Insurance

However, one of the issues that still need to be addressed is the IDBI Bank stake in IDBI Federal Life Insurance, according to officials in the know.

“This will have to be looked into and IDBI Bank may have to sell of its stake in the life insurer,” said the second official.

Under current IRDAI laws, a single entity can not have two competing insurance businesses. IDBI Bank holds 48 per cent stake in the life insurer IDBI Federal Life Insurance and has been in talks to exit its stake. However, it has been unable to find a buyer till now.

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