ICICI Bank exempted from paring stake in insurance subsidiaries for 3 yrs

ICICI Bank on Monday said it has got exemption from paring stake in its life and non-life subsidiaries to 30 per cent for a period of three years.

A government notification exempted ICICI Bank from the provisions of Section 19(2) of the Banking Regulation Act, 1949 with respect to shareholding above 30 per cent in ICICI Lombard General Insurance Company and ICICI Prudential Life Insurance Company Limited, for a period of three years, the bank said in a regulatory filing.

The central government, on the recommendation of the Reserve Bank of India, issued the notification on September 9, 2020, it added.

Sub-section (2) of Section 19 of the Banking Regulation Act, 1949 provides that no banking company shall hold shares in any company, whether as pledgee, mortgagee or absolute owner, of any amount exceeding 30 per cent of the paid-up share capital of that company or 30 per cent of its own paid-up share capital and reserves.

"As previously announced by ICICI Lombard General Insurance Company, it has proposed an acquisition of another general insurance business (Bharti AXA General), which if consummated would result in ICICI Bank's shareholding in ICICI Lombard General Insurance Company Limited reducing to less than 50 per cent," it said.

The above exemption would facilitate compliance with the Banking Regulation Act, it said.

The exemption during its operation may permit both ICICI Lombard General Insurance Company and/or ICICI Prudential Life Insurance Company to consider strategic options such as mergers and acquisitions or capital raise which have the potential of reducing the bank's shareholding.

"There are no current plans for the bank to divest to less than 50 per cent shareholding in ICICI Prudential Life Insurance Company Limited. There would be no impact on the current distribution arrangements," it added.

The above is unrelated to the bank's current assessment of its financial position and outlook, it said.

ICICI Bank has stated in the past that based on its capital position, operating profits and provisions already made, it expects to be well positioned to absorb the stress arising out of the COVID-19 pandemic, it added.

Subsequently, the bank has further strengthened its balance sheet by raising Rs 15,000 crore of additional equity capital in August 2020, it said.