IDBI Bank Ltd, in which Life Insurance Corporation of India (LIC) acquired a 51% stake in January, has started the process of selling its mutual fund business, said two persons aware of the development.

“IDBI Bank has appointed ICICI Securities Ltd to advise it on a 100% sale of its mutual fund business, IDBI Asset Management Ltd and IDBI MF Trustee Co. Ltd. The bank has invited expression of interest from buyers by 10 June," said one of the people mentioned above, requesting anonymity as he is not authorized to speak with the media.

The mutual fund business of the debt-laden lender has assets under management (AUM) of more than 9,000 crore, said the second person mentioned above, also requesting anonymity.

“Mutual fund businesses are generally valued at 4-5% of their assets under management . So, the sale of the business could fetch the bank 360-450 crore," he said.

An email sent to IDBI Bank did not elicit any response till press time.

The sale of the mutual fund business was necessitated as the bank’s new owner, LIC, has its own mutual fund business and regulators were not in favour of letting them run the same business under two different entities, he said.

For the quarter ended 31 December, the bank’s loss widened to 4,185 crore, increasing almost three times from a loss of 1,524 crore in the same period last year.

The bank’s gross non-performing assets (NPAs), however, improved slightly to 29.67% in the third quarter from 31.78% in the July-September period. Net NPAs stood at 14% against 17.30% in the preceding quarter.

Apart from the mutual fund business, IDBI Bank also wants to sell its stake in IDBI Federal Life Insurance Co. Ltd, a three-way joint venture between IDBI Bank, Federal Bank and Belgian insurer Ageas.

IDBI holds 48% stake, while Federal Bank and Ageas own 26% each.

In January, IDBI Bank had told the exchanges that its board has approved a proposal to resume the process of divesting its stake in the life insurance business.

On Wednesday, shares of IDBI Bank closed at 37 apiece, down by 2.5% on the BSE, while the benchmark Sensex closed at 39,502.05, down 0.62%.