LIC's IDBI Bank sale at ₹82 draws policyholder challenge

The All-India Bank Officers’ Association (AIBOA) has asked the Insurance Regulatory and Development Authority of India (IRDAI) to block LIC's proposed sale of its controlling stake in IDBI Bank, arguing the reported price of about ₹82 a share would shortchange policyholders.

In a representation to the regulator, AIBOA said the price fails to meet the condition IRDAI imposed when it allowed LIC to acquire 51% of IDBI Bank in 2018 – that the insurer maximize returns from the investment and protect policyholder interests. LIC bought 529.41 crore shares at about ₹61 each in 2018. After nearly eight years, the cumulative return on that investment is roughly 34%, or about 3.7% annualised, far below what LIC's overall investment portfolio would have earned over the same period, the union said.

“The interests of policyholders must be protected and every effort should be made to secure an appropriate return on LIC’s investment,” the union said in the letter, a copy of which was seen by The Hindu Businessline.

S Nagarajan, General Secretary of AIBOA, recalled that the 2018 IRDAI approval was a special-case exemption with explicit conditions. One of those conditions required LIC to make all efforts to maximize returns from the IDBI Bank transaction so that returns were commensurate with the average returns from its overall investments. The union questioned whether a sale at around ₹82 per share – as indicated in media reports – adequately satisfies that condition.

Any loss from selling IDBI Bank equity at an inadequate valuation could ultimately have implications for policyholders, including through a possible impact on future bonuses, the representation said. The union also urged that IDBI Bank continue under public-sector ownership, arguing that the regulator is committed to safeguarding national financial institutions and the interests of savers.

AIBOA appealed to IRDAI to intervene before any final decision on the stake sale, arguing the transaction should satisfy the conditions under which LIC was originally permitted to acquire control of the bank. The representation concludes by seeking IRDAI's cooperation in what it describes as a matter involving policyholder interest and the future ownership structure of a significant financial institution.

The government has been pushing to privatise IDBI Bank, and LIC's stake sale is a key part of that plan. The union's intervention adds regulatory uncertainty to the deal timeline. The IRDAI has not yet responded to the representation, the union said.