Abizer Diwanji, Partner and National Leader – Financial Services, EY India, tells ET Now that for LIC to restrict itself to a nominee director cum stopgap investment role in IDBI is not the right way to spend policyholders’ money.Edited excerpts: When we broke the story that LIC would be acquiring stake in IDBI Bank, the response from the government was immediate and quick. They in a sense justified the deal by saying that LIC always wanted to be a bank and now we are giving them a chance to be a bank. We have learnt now is that LIC will only remain as a promoter entity and they will not be involved in the operational businesses. It looks like just a transaction where government is using policy shareholders’ money to bail IDBI Bank out. If that is the case, it is unfortunate because I have been associated with LIC for some time when they were trying to pursue a banking opportunity. I frankly think that it is best for LIC to come in as a more strategic and synergistic investment as against just a nominee pumping in Rs 13,000 crore. First of all, I do not think Rs 13,000 crore is enough. So, there has to be a game plan to infuse more. Secondly, if so much money is getting into it, it should be as shareholders’ money and not necessarily policyholders’ money because that is where most of the protection comes in. LIC has got a great track record of building organisations. It has built the mutual fund. It has built the housing finance company and if it now gets into a bank, it is going to turn it around pretty well. So, just restricting it to a nominee director cum stopgap investment to be exited in five years is not right. A more long-term synergistic approach will be better for LIC, its policyholders, its shareholders and frankly for IDBI and the banking system. At any point, could there be any hurdle emerging out of this deal besides the fact that LIC will not be all hands on and it will be more like a promoter entity which has infused cash into IDBI? The biggest hurdle is that you can keep infusing money into some of these beleaguered organisations but unless you fundamentally change the way they function, it is good money going down after bad money. I do not think that is going to have much effect. It is a big risk and if that follows as a trend, then we have a much bigger problem given that the banking system as a whole needs an excess of Rs 2 lakh crore. If that kind of money is made available from quasi institutions owned by the government and no structural change is implemented, then that money is as good as lost. LIC also has a large ownership in other private banks and PSU banks. Wouldn’t there be conflict of interest because if you are now the new majority owner or promoter or quasi promoter of IDBI Bank, can you have up to 11-12% stake in other banks? Having a stake in banks and running the operations of those banks are two different things. For a nominee director of a bank, having a stake in other banks is not that much of an issue. Yes, confidentiality needs to be preserved because the nominee director would be aware of the plans of the other banks. To that extent, there is some level of conflict but otherwise just with shareholding per se, I do not see any conflict. Can LIC be the promoter of IDBI Bank and could have nominee directors in other PSU banks? Nominee directors is an issue but shareholding is not an issue.