Government has again turned to country’s largest institutional investor Life Insurance Corporation of India (LIC) seeking its help. This time government has asked LIC to help it in capitalizing small public sector banks.
Banks will sale their new shares to LIC to raise funds. In this way government will able to indirectly retain its stake in banks. Pricing will be based on Securities and Exchange Board of India’s (SEBI) formula and it will not leave any room for speculation.
Over dozens of small public sector banks are waiting for fresh capital from government. But due to increasing fiscal deficit government is falling short in resources hence it is not able to pump in required capital in banks.
LIC will walk Along with government in capitalizing banks that are restructuring their debts even though they are saddling with bad loans.
Dena bank and Syndicate bank may be the first banks to sale their shares to LIC.
LIC has annual equity investments of around Rs 40,000 crore.