New Delhi: The Union Cabinet chaired by Prime Minister Narendra Modi today approved the purchase of 51 per cent controlling stake in IDBI Bank by state-run insurer Life Insurance Corporation (LIC).
The decision also conveying no objection to reduction in Government of India shareholding in IDBI Bank Limited to below 50% by dilution, said a statement.
It has also approved acquisition of controlling stake by Life Insurance Corporation of India (LIC) as promoter in the bank through preferential allotment / open offer of equity, and relinquishment of management control by the Government in the bank. The acquisition has wide-ranging synergy benefits for customers, LIC and the bank.
Benefits to the two entities emanate from economies of scale, reduction in the costs of distribution and customer acquisition, greater efficiency and flexibility in operations, and greater opportunity for cross-selling of products and services.
These would help financially strengthen both LIC and the bank, as well as their subsidiaries which offer financial products such as housing finance and mutual funds.
Further, the bank would get an opportunity to tap 11 lakh LIC agents for doorstep banking services, positioning it to improve customer services and deepen financial inclusion.
The bank would also be positioned to benefit in terms of lower cost of funds through acquisition of low-cost deposits, and fee income from payment services.
LIC would get bancassurance (i.e. selling of insurance products by bank) through the bank’s network of 1,916 branches, besides access to bank’s cash management services.
Further, LIC would gain in terms of furthering the realisation of its vision of becoming a financial conglomerate.
Customers too would benefit through wider offerings of financial services under one roof, and LIC being better positioned to expand life insurance coverage.