The Chairman of LIC, M.R. Kumar, gave his first address to the media after submitting the draft prospectus of the Corporation to SEBI.
Firstly, he mentioned that LIC is reserving one-tenth of the issue size for its policyholders. Further, the Corporation would offer a discount on the IPO to its policyholders and employees of the Life Insurance Corporation of India. He said, anticipating stock allotment, nearly 7 million policyholders have either opened or linked their Demat accounts with LIC policies they are holding.
Speaking on IDBI bank, he said that the Government would soon announce the divestment of the Bank. However, he also mentioned that LIC would be keen on keeping at least some stock of the Bank for strategic reasons — mainly for distribution and infrastructure support.
In 2018, while allowing LIC to buy a majority stake in IDBI Bank, RBI had instructed LIC to limit its mortgage lending to only one financial entity. The Central Bank gave the Life Insurance Corporation of India five years to implement this — that is, before Nov 2023.
LIC first bought a 51% stake in IDBI Bank in early 2019. By October the same year, it infused Rs.4,743 crore in IDBI Bank. At present, its stake in the Bank is 49.24%, after it raised Rs.1435 crore through a qualified institutional placement by the end of 2019.
LIC Housing Finance is already India’s second-largest non-bank home financier with a loan book of 2.43 lakh crore. LIC bought stakes in IDBI Bank as a strategic asset. Today it is the largest bancassurance channel for LIC.
So if IDBI’s divestment happens, LIC may be able to operate home loans through both the Bank and LIC Housing Finance. Else, it might use IDBI as its bank agent to source home loans for LIC Housing Finance. Also, this option would comply with RBI’s directive.
Image Source https://en.m.wikipedia.org/wiki/LIC_Building