LIC may take part in bank recapitalisation programme

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New Delhi: Life Insurance Corporation of India (LIC) may be roped in to participate in the Rs2.11 trillion bank recapitalisation initiative, according to people close to the development.

As part of the bank recapitalisation programme, LIC could also increase its stake in various public sector banks which are required to raise Rs58,000 crore from the capital market, the people said. Besides, they said, LIC could participate in a non-operating holding company (NOHC) structure to which the government may transfer its share in various public sector holdings.

These non-operating holding companies could then issue recapitalisation bonds worth Rs1.35 trillion. The government, however, has said that nature of the recapitalisation bonds and who will issue them would be decided in the due course.

Union finance minister Arun Jaitley had last week said that there were multiple options before the government for recapitalisation bonds and they are being examined and the best ones would be explored.

LIC has in the past invested in public sector banks through preference share allotment and qualified institutional placements (QIP). Earlier this year, Bank of India issued preference share to LIC worth Rs451 crore. Similarly, UCO Bank, IDBI Bank, United Bank of India, Dena Bank and Indian Overseas Bank also issued preference shares to LIC in the past few years as part of their effort to shore up their capital.

In the recent Rs15,000 crore QIP placement by State Bank of India (SBI), LIC was one of the largest participants. It picked up shares worth more than Rs5,800 crore, or 38.6% of the total fundraising.

If there is LIC participation in the government’s bank recapitalisation initiative, it would be as per the regulatory investment ceiling fixed by the Insurance and Regulatory Development Authority of India (IRDA), said people aware of the development.

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