Life Insurance Corporation of India’s reported proposal to acquire a 40 per cent stake in the loss-making IDBI Bank may face regulatory headwinds as the former has an equity stake in many large companies the latter has given loans to, raising the possibility of breaching regulators’ caps on equity holding in case the loans get converted into equity.
Market experts say that in the aforementioned scenario, the market and insurance regulators may take a dim view of the common shareholding of the public sector life insurer and the public sector bank as they will be seen as acting in concert.
