IDBI Bank has announced that the Securities and Exchange Board of India (SEBI) has approved the reclassification of Life Insurance Corporation of India (LIC) as a “public shareholder”, subject to the completion of the government’s strategic disinvestment process. The move marks a significant step in the bank’s ongoing privatisation journey and its shareholding restructuring.
LIC’s stake and voting rights
As of the quarter ending June 2025, LIC holds a 49.24 per cent stake in IDBI Bank. Under SEBI’s conditions, LIC’s voting rights in the lender will be capped at 10% of the total net effective voting rights, regardless of its equity holding.
The insurer will not exercise direct or indirect control, nor hold any special rights, board representation, or key managerial positions.
No control or special rights
SEBI’s approval comes with strict stipulations. Additionally, LIC’s intention to have its residual stake treated as public must be disclosed in the open offer letter issued to shareholders by the new acquirer under the disinvestment plan. After the transaction, LIC must reduce its residual shareholding to 15% or below within two years, in line with directions from the Reserve Bank of India.
IDBI Bank is required to make the necessary applications to stock exchanges for LIC’s reclassification post-disinvestment. SEBI has also clarified that if any of the specified conditions are breached, the approval will be automatically withdrawn.
LIC will not have any representation on IDBI Bank’s board of directors nor act as a key managerial person. The insurer will also not be entitled to any special rights, whether formal or informal, in the running of the bank’s affairs.
In addition, the regulator clarified that the reclassification will be rendered void if LIC fails to comply with any of the prescribed conditions.
Next steps in disinvestment process
Following the completion of the strategic sale, IDBI Bank will be required to apply to stock exchanges for the formal reclassification of LIC as a public shareholder. The Cabinet Committee on Economic Affairs had approved the strategic disinvestment of IDBI Bank in May 2021, involving the joint sale of stakes by the government and LIC.