“The Life Insurance Corporation invested around Rs 21,624 crore in IDBI, including buying a 26 per cent stake at a price of Rs 61.73 a share. That share price has now dropped to Rs 43.10, around a 30 per cent fall in price. This is a worrying phenomenon, especially as IDBI Bank does not look like turning around anytime soon,” said officials.

IDBI Bank’s loss widened nearly three-fold to Rs 4,185.48 crore for the third quarter ended December 31, 2018, as bad loans surged.

Gross non-performing assets (NPAs) shot up to 29.67 per cent of the gross advances during the quarter against 24.72 per cent in the year-ago period.

The bigger worry is this may not be the end of the woes at the bank as its losses may mount unless infrastructure projects to which it lent take off.

“Under the circumstances, the LIC is balking against pushing more money into IDBI,” officials said.

The LIC’s investments are from the corpus built through insurance premium, and the losses it suffers on its investments will impact bonus payouts to policy-holders.

IDBI Bank, which the LIC wants to rename LIC Bank or LIC-IDBI Bank, has a current gross NPA of 29.67 per cent.

Officials say there is another 25 per cent of its loan portfolio, which is “suspect”, an euphemism for potential bad loans.

North Block officials said they had no desire to add to the government’s debt burden by paying IDBI’s recapitalisation. However, continued reliance on a reluctant LIC may be difficult.

Though the LIC has officially stated that it bought IDBI as it wanted to expand into banking, it’s well known the state-run insurer was investing in IDBI at the prodding of the finance ministry which did not want to be saddled with the huge investment needed and wanted to keep the expenditure off budget by getting the LIC to foot the bill.

Many analysts had termed the Life Insurance Corporation’s purchase of the sick bank as a case of throwing good money after the bad when the proposal came up in June last year.