Irda nod to LIC-IDBI deal based on merit, says official

By Vijay Ganeshan Iyer

ET NOW: The Insurance Regulatory Development Authority of India (Irda), has defended the exemption given to Life Insurance Corporation for acquiring up to 51 per cent in the state-owned IDBI Bank, saying the decision was based purely on merits of the case.

Speaking to ET NOW, Nilesh Sathe, whole-time member of Irda, said LIC had sought an exemption to invest in the debt-ridden bank purely as an investment and added that the state-owned insurer was given at least three such exemptions in the past.

Sathe said that LIC will bring down its stake in IDBI Bank to less than 15 per cent over a period of time. No deadline has been set for LIC to comply with this norm as it could have put pressure on the IDBI Bank stock, he explained.

According to Sathe, LIC is free to chart its investment strategy which is not influenced by the insurance regulator.

The board of directors of Irda cleared a request by LIC for an exemption from the mandatory 15 per cent investment cap on June 29.

LIC’s proposal to invest in IDBI Bank has been criticised by experts and investors who believe that policyholder’s money should not be used to bail out cash-strapped banks.

LIC has been using money generated by selling policies to bail out government disinvestment programmes and investors are worried about the impact on their returns.

Market participants had also cautioned that IDBI Bank’s financials are too weak and a turnaround is highly unlikely in the near term.

As of March 31, 2018, gross NPA (non-performing assets) of IDBI Bank stood close to 28 per cent.

In absolute terms, gross bad loans stood at Rs 55,588.26 crore compared with Rs 44,752.59 crore on March 31, 2017.

In the March 2018 quarter, IDBI Bank’s net loss widened to Rs 5,662.76 crore as a higher provisioning for non performing asssets hurt its bottom line.