new delhi jun 26 insurance behemoth lic is looking to enter the banking space by acquiring majority stake in idbi bank as the deal is expected to provide business synergies despite the lenders stressed balance sheet sources said as the government makes efforts to revive the fortunes of idbi bank which is saddled with huge amounts of bad loans lic becoming a major stakeholder in the lender could be beneficial for both stateowned financial players in the long run they added while a final decision is yet to emerge on whether lic would be snapping up over 50 per cent stake in idbi bank official sources said the preliminary contours of such a plan is being worked out a possible scenario would be the insurance major making idbi bank as a subsidiary on the line of its housing finance and mutual fund businesses according to the sources there would be business synergies in case the licidbi bank deal materialises a listed entity idbi bank is grappling with mounting toxic loans with gross non performing assets rising to a staggering rs 55600 crore at the end of latest march quarter during the three months the lenders net loss stood at rs 5663 crore the bank has a market capitalisation of nearly rs 23000 crore while its real estate assets as well as its investment portfolio are estimated to be worth over rs 20000 crore among its noncore assets are investments in the national stock exchange idbi federal life insurance idbi mutual fund idbi capital markets and national securities depository ltd taking into consideration these factors the current valuation of the bank does not reflect its inherent fundamentals and at this juncture it would be a better proposition to rope in a stateowned entity as a strategic investor the sources said shares of the bank slumped nearly 7 per cent to close at rs 5450 on the bse today on monday a senior finance ministry official had said that both lic and idbi bank have independent boards which would take a call on the possible deal in his budget speech for 201617 then finance minister arun jaitley had said the process of transformation of idbi bank has already started government will take it forward and also consider the option of reducing its stake to below 50 per cent he had said idbi bank has already done valuation of its real estate assets at the market price sources said they noted that in a stake sale the government would not get the proceeds and the money would be utilised for the banks revival it could happen through issuance of fresh equity so that the governments stake which is presently at 8096 per cent would come down below 50 per cent as announced in the budget sources said some private sector players are also eyeing strategic stake in idbi bank at lower valuations according to market analysts private insurance companies might be wary of lic entering banking space as that could further bolster