New Delhi, September 4: A day after the Narendra Modi government approved Rs 9,300 crore fund infusion in IDBI Bank, a report has arrived that Life Insurance Corporation (LIC) has lost over Rs 17,000 crore of its wealth in Public sector banks (PSBs) over the past year. The stake of LIC in the IDBI bank increased to 51 per cent in January this year, which lost Rs 4,743 crore solely. While, the public sector undertaking lost over Rs 4,800 crore in other PSBs in one year. Economic Crisis Deepens in India as Rupee at 9-Month Low, Stock Market Crashes And Investor Wealth Plunges Rs 2.55 Lakh Crore

The recent announcement of bank mergers of 10 PSUs into four entities by the Union Finance Minister Nirmala Sitharaman has lead to 20-30 percent dilution in the book value of the merged entities over the next year or so. Following this, experts opine that this would lead to LIC’s value of holdings in PSU Banks erode further.

According to a report, published in the Business Line, the Union government had infused Rs 1.06 lakh crore into banks, most of which were trading at 0.4-0.6 times their book value. This capital infusion by the government has hurt minority shareholders, including LIC. Since then the government infusing capital at low valuations, dilution in equity base is bond to take place. Narendra Modi Cabinet Approves Rs 9,300 Crore Capital Infusion in IDBI Bank

Considering the case of PSU bank mergers, the PSU insurer is most likely to lose wealth in PSBs again as there could be a sharp 20-30 per cent dilution in the book value of the resultant merged entity. LIC is among the minority shareholders that hold stakes in these PSU Banks — in PNB, LIC owns 7.3 percent stake, while in Union Bank, it holds a 6.4 percent stake. With the dilution owing to the government’s capital infusion rise, LIC’s stake in these banks could come down significantly to 3-5 percent.

(The above story first appeared on LatestLY on Sep 04, 2019 05:22 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).