New Delhi, Aug 1 (IBNS): The Union Cabinet chaired by Prime Minister Narendra Modi has approved conveying of no objection to reduction in Government of India shareholding in IDBI Bank Limited to below 50 percent by dilution.
"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," read a government statement.
Speaking on the impact of the move, the government said in a statement: "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," it said.
With the move, 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," read a government statement.