The All-India IDBI Officers’ Association has cautioned that any move by the Life Insurance Corporation (LIC) of India to offload the stake held in IDBI Bank could hurt the interests of policyholders of LIC. The public sector life insurer was permitted to acquire up to 51 per cent equity in IDBI Bank, breaching the cap of 15 per cent originally stipulated for such transactions.
In a letter to the Chairman, Insurance Regulatory and Development Authority of India (IRDAI), Vithal Koteswara Rao AV, General Secretary of the Association, said that various reports in the media have suggested that LIC has been making repeated efforts to offload the stake it holds in IDBI Bank.
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Loss may be distributed
Any loss that the LIC incurs in the transaction will, in turn, be distributed among the policyholders while declaring bonuses. The stake it holds in the bank was purchased at an average price per share of about ₹60 in 2019 whereas the current market price of the IDBI Bank share is at ₹40, Rao said.
The LIC of India holds 529,41,02,939 shares of IDBI Bank currently. When seen in absolute terms, the deal, if allowed to go through, will cause a loss that could runs into several thousands of crores, Rao said in the letter. It will only force the policyholders of the LIC to bear the brunt of this humongous loss.
“As most of our members are also policyholders of the LIC, we are obliged to make this request on behalf of our members to arrange to initiate suitable measures to see that none of the policyholders is subjected to any financial loss when the LIC seeks to pare the stake it now holds in IDBI Bank,” the letter said.
Series of worrying events
The Association expressed its worry over a series of events initiated with the acquisition of 51 per cent of stake in IDBI Bank in January 2019, followed by an announcement by the Reserve Bank in March that year that the status of IDBI Bank stands changed from a public sector bank to a private bank.
The next was the unilateral modification of service conditions of IDBI Bank officers by the management linking their performance with prospective termination, which the Association feels has been made with a clear intention of subjecting them to victimisation ‘as per the whims and fancies of the management’.
The Union Finance Minister’s observation that interests of the workforce of any public sector bank being privatised would be protected, attracts interest. But the ground reality prevailing at the bank versus the Finance Minister’s pronouncement are contradictory, the Association says.