On Tuesday, the Union Cabinet approved the capital infusion of Rs 9,300 crore into IDBI Bank to increase the lender's capital base.
Of the total funds, the government will make a one-time infusion of Rs 4,557 crore, while the rest will be made by Life Insurance Corporation of India (LIC), to "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," according to a statement released by the Cabinet.
"IDBI Bank needs a one time infusion of capital to complete the exercise of dealing with its legacy book. It has already substantially cleaned up, reducing net NPA from peak of 18.8% in June 2018 to 8% in June 2019. The capital for this has to come from its shareholders. LIC is at 51% and is not allowed to go higher by the insurance regulator. Of the Rs. 9,300 crore needed, LIC would meet 51% (Rs. 4,743 crore). Remaining 49%, amounting to Rs. 4,557 crore, is proposed from Government as its share on one time basis," the statement said.
LIC holds a controlling stake in IDBI Bank.
During the Union Budget presentation, the government had announced capital infusion of Rs 70,000 crore into public sector banks.