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Mumbai: The board of IDBI Bank on Tuesday approved a proposal to seek the government’s nod to classify Life Insurance Corp. of India (LIC) as a promoter once India’s largest life insurer acquires majority stake in the state-owned bank.

In a notification to the exchanges, the bank said that it has received communication from LIC expressing interest in acquiring 51% controlling stake in the bank, through preferential allotment of shares or an open offer.

“So, largely the three things to look into are expression of interest by LIC taking a 51% controlling stake, to give them promoter status and to decide upon mode of infusion whether by way of preferential shares or through an open offer," said B. Sriram, managing director and chief executive officer, IDBI Bank. “LIC will get management control post the deal," he said.

On Monday, the board of LIC approved a plan to increase its stake in the bank to 51%. It now holds around 7.5% stake in IDBI Bank. LIC will buy the remaining stake from the government, department of economic affairs secretary, Subhash Garg said.

On 29 June, the Insurance Regulatory and Development Authority of India (IRDA) provided LIC a regulatory exemption to pick up more than 15% stake in a company. However, it has to pare its stake to 15% over five to seven years. The proposed deal would require approval of government and the Reserve Bank of India.

“The banking regulator’s nod will be needed for change in promoter status, acquisition of more than 10% stake, and fit and proper status," Sriram said. “There is no specific timeline for the stake sale process to be completed."

LIC’s investment in IDBI Bank is seen as a bailout of the state-owned bank, which has gross non-performing assets of Rs55,588 crore. The bank’s core Tier I capital ratio is at 7.42%, slightly above the threshold limit of 7.35%.

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