India's insurance regulator has allowed the country's largest state-run insurer Life Insurance Corporation (LIC) to buy a stake of up to 51% in state-owned lender IDBI Bank, reports according to media reports. This represents dispensation for the insurer as rules for insurers cap investments to 15% of the equity of a single entity.
IDBI is one of the 11 troubled lenders identified by the central bank, Reserve Bank, of India under a corrective action plan that includes restricting branch expansion and lending.
The media reports added that the IRDAI board had also allowed LIC to invest between INR100 billion ($1.46 billion)and INR130 billion in IDBI, where its holding was 10.82 % at the end of March. LIC will not have management rights in the bank. It will also reduce its stake in the bank to about 15% over a 5-7 year period.
The purchase by LIC is seen as a bailout of the troubled bank.