LIC Housing or IDBI will stop home loan business by Nov 2023: LIC IPO DRHP

With Life Insurance Corporation (LIC) becoming a parent company of both IDBI Bank and LIC Housing Finance, either of the subsidiaries will have to wind down its home loan business in the next 20 months, according to the Reserve Bank of India’s (RBI’s) condition while approving the insurance behemoth’s takeover of the erstwhile public sector lender.

In its approval letter dated November 2, 2018, for the acquisition of additional shares by LIC in IDBI Bank, the banking regulator said either of LIC’s associates would have to cease its housing finance business within five years of the date of the approval letter.

Housing finance will be conducted only by one entity, the insurer said, in the draft red herring prospectus (DRHP) for its initial public offering (IPO).

The five-year period will end in November 2023.

“The impact of complying with this requirement of the RBI may have an adverse effect on our financial condition, results of operations and cash flows,” LIC said in the DRHP.

IDBI Bank became a subsidiary of LIC with effect from January 21, 2019. The insurer owns 51 per cent in the bank and 45.24 per cent in LIC Housing Finance.

According to RBI norms, two entities of the same group cannot do a particular business.

As on December 31, 2021, IDBI Bank’s home loan portfolio was Rs 45,617 crore and LIC Housing Finance’s outstanding loan book was at Rs 2.43 trillion.

After acquiring a 51 per cent stake in IDBI Bank, the insurer infused another Rs 4,743 crore into it in October 2019.

The bank had raised another Rs 1,435 crore in December 2020 by way of qualified institutional placement.