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LIC unlikely to invest in Yes Bank; here's why

BusinessToday.In     March 9, 2020

Even before YES Bank was placed under moratorium, Life Insurance Corporation of India (LIC) was touted as an ally to State Bank of India in the mission to rescue the private lender from its scary loan book. After things played out as they did, the biggest bank in the country is now expected to lead a consortium to keep YES Bank from going kaput. However, the insurance major might keep its hands off the troubled private bank for now.

Talking to Business Today Editor Rajeev Dubey, SBI Chairman Rajnish Kumar stated that any investment from LIC would have to adhere to the shareholding limit of 10 per cent mandated by the Reserve Bank of India (RBI).

"No, as I said, LIC, I think, is an existing investor. But, everybody is welcome. As of now, we have not approached LIC. They already have an existing investment, so it is not necessary that LIC has to participate. But if they want to, there is no issue if it is within the limit of 10 per cent," SBI Chairman Rajnish Kumar said.

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As of now, LIC holds 8.06 per cent stake in YES Bank. According to Master Direction - Ownership in Private Sector Banks, Directions, 2016 by the RBI, "In the case of individuals and non-financial entities (other than promoters / promoter group), the limit (of shareholding) shall be 10 per cent of the paid-up capital". This means, as things stand, LIC can acquire only 1.94 per cent stake in YES Bank. The state-run insurer might give the meagre stake hike a pass.

Meanwhile, LIC has other priorities to take care of. It has freshly found its feet after merger with troubled state-run lender IDBI Bank in January last year. In her Budget speech early this year, Finance Minister Nirmala Sitharaman had announced that government will sell some of its stake in LIC by the way of IPO issue, which can be the biggest ever in India.

In the interview, Kumar said that SBI is in talks with several investors, and will have them shortlisted by Monday, along with the investment outline, for the RBI. "There are certain regulatory issues, so once we have the investors, who are willing to co-invest with State Bank of India... we will approach Reserve Bank of India and tell them that this is the list of the potential investors apart from SBI," the SBI Chairman said.

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