The Reserve Bank of India (RBI) has granted approval to state-owned insurance giant, Life Insurance Corporation of India (LIC), to bring its stake up in private lender Kotak Mahindra Bank up to 9.99 percent. Currently, the life insurer holds 4.96 percent in the private lender.
In a notice to the exchanges, the moneylender said, “Kotak Mahindra Bank Limited has received an intimation from LIC stating that the RBI had granted its approval to LIC, for expanding its holding in the Bank up to 9.99 percent of the paid-up equity share capital of Bank”.
Shares of Kotak Mahindra Bank closed gains of 2.92 percent on the BSE post the announcement, the most among Sensex components.
The approval of the central bank will be valid for one year. According to RBI norms, prior approval of the RBI is needed to increase the stake in private banks by 5%.
LIC is one of the greatest institutional investors in India’s stock market and has a stake in various private and public sector banks. LIC has a stake in as numerous 24 scheduled commercial banks, data from Capitaline shows. It holds a 49.24 percent stake in IDBI Bank.
When LIC raises its shareholding in Kotak Mahindra Bank to 9.99 percent, it will be the second biggest shareholding of the insurer in a scheduled commercial bank. Among other major banks, LIC holds 8.8 percent in Canara Bank, 8.3 percent in Punjab National Bank and State Bank of India, 8.2 percent in Axis Bank, and 7.6 percent in ICICI Bank.