The government's contribution was limited to its shareholding because LIC, which already holds 51 per cent stake in the bank, cannot breach the limit as per the norms of insurance regulator, requiring the government to chip in its share of capital infusion.

"The capital for this has to come from its shareholders. LIC is at 51 per cent and is not allowed to go higher by the insurance regulator. Of the Rs 9,300 crore needed, LIC would meet 51 per cent (Rs 4,743 crore). Remaining 49 per cent, amounting to Rs 4,557 crore, is proposed from the government as its share on one time basis," Union Environment, Forests and Climate Change Minister Prakash Javadekar said at the media briefing on cabinet decisions.

"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 the option of recovering its investment at an opportune time," he said.

Javadekar also said the capital infusion is for meeting the capital adequacy ratio of IDBI Bank.

While announcing the bank merger plan recently, the government said Rs 55,250 crore capital would be infused into the merging banks and also the Bank of Baroda. But the IDBI Bank did not figure in the list.

Out of the Rs 55,250 crore up front capital for credit growth and regulatory compliance to support economy, the PNB will get Rs 16,000 crore, the Union Bank Rs 11,700 crore, the Canara Bank Rs 6,500 crore, the Indian Overseas Bank Rs 3,800 crore, the Central Bank of India Rs 3,300 crore, the Bank of Baroda Rs 7,000 crore, the Indian Bank Rs 2,500 crore and the Uco Bank Rs 2,100 crore.

Following Cabinet's approval in August 2018, LIC acquired 51 per cent stake in IDBI Bank. The government continues to be a promoter and holds 46.46 per cent stake.

Javadekar said the financial parameters of IDBI Bank have improved considerably during the last one year.

CRAR has improved from 6.22 per cent as on September 30, 2018 to 11.58 per cent as on March 31, 2019. Net NPA ratio reduced from 17.3 per cent as on September 30, 2018 to 10.11 per cent as on March 31, 2019 and further to 8.02 per cent as on June 30, 2019. Provision Coverage Ratio (PCR) improved from 69 per cent (September 30, 2018) to 83 per cent (March 31, 2019) and further to 88 per cent on June 30, 2019.

Synergy with the LIC has enabled access to 29 crore policy-holders base spread over 3,184 branches and also to 11 lakh agents and 2 lakh employees of the LIC. Rs 500 crore revenue for FY 2020 and Rs 1,000 crore from FY 2021 onwards is projected from the synergy.

Sale of insurance kick-started in March 2019 with Rs 160 crore in premiums. This momentum has continued with over Rs 250 crore premium collection in first four and a half months of this year. FY 2019-20 target is Rs 2,000 crore of premiums and Rs 200 crore revenue.

Additional business anticipated is Rs 5,000 crore (Housing loan, Auto loan, personal loan) by leveraging LIC agents' network, according to the official statement.