LIC, which has a controlling stake in IDBI, will infuse Rs 4,743 crore. The government will provide Rs 4,557 crore as a one-time re-capitalisation, he said.
The government had earlier announced capital infusion of Rs 70,000 into public sector banks in a bid to clean up their balance sheets which are littered with huge non-performing assets.
"It will help in completing the process of IDBI Bank's turnaround and enable it to return to profitability and normal lending, and giving the government an option of recovering its investment at an opportune time," according to an official statement.
IDBI Bank needs a one-time infusion of capital to complete the exercise of dealing with its legacy book. It has already substantially cleaned up, reducing net non-performing assets from a peak of 18.8 per cent in June 2018 to 8 per cent in June 2019.
After this infusion, IDBI Bank expects to be able to subsequently raise further capital on its own and expects to come out of the RBI's Prompt Corrective Action (PCA) framework sometime next year, said the statement.
This cash neutral infusion will be through recap bonds, that is government infusing capital into the bank and the bank buying the recap bond from the government the same day, with no impact on liquidity or current year's Budget.