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IDBI Bank to get Rs 9,300 crore capital infusion from government, LIC

Of the total Rs 9,300 crore, LIC would give Rs 4,743 crore while the remaining Rs 4,557 crore has been proposed from government.

IDBI Bank to get Rs 9,300 crore capital infusion from government, LIC

New Delhi: IDBI Bank will soon get capital infusion of Rs 9,300 crore from the government and  Life Insurance Corporation of India (LIC).

Of the total Rs 9,300 crore, LIC would meet 51 percent (Rs 4,743 crore while the remaining 49 percent, amounting to Rs 4,557 crore, has been proposed from government as its share on one time basis, an official release said.

“The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved the Infusion of Rs 4,557 crore by Government in IDBI Bank. It will help in completing the process of IDBI Bank’s turnaround and enable it to return to profitability and normal lending, and giving Government the option of recovering its investment at an opportune time,” the release said.

After this infusion, IDBI Bank expects to be able to subsequently raise further capital on its own and expects to come out of RBI’s Prompt Corrective Action (PCA) framework sometime next year.

This cash neutral infusion will be through recap bonds i.e government infusing capital into the bank and the bank buying the recap bond from the Government the same day, with no impact on liquidity or current year’s Budget.

In August 2018, LIC acquired 51 percent stake in IDBI Bank while the government continues to be a promoter and holds 46.46 percent stake.