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 to below 50% 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.

Impact:

> The acquisition has wide-ranging synergy benefits for customers, LIC and the bank.

> 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.

> Further, 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.

> Further, LIC would gain in terms of furthering the realisation of its vision of becoming a financial conglomerate.

> Customers too would benefit through wider offerings of financial services under one roof, and LIC being better positioned to expand life insurance coverage.