State-owned Life Insurance Corporation (LIC) of India has sought the government's approval to buy a controlling stake in IDBI Bank. The LIC investment committee will take a final decision on it. The insurer will hold around 51 percent stake in the bank post acquisition.

LIC has already 10.82 percent in IDBI Bank and It would require regulatory clearance to increase this beyond 15%.

Sandeep Parekh, Founder, Finsec Law Advisors in an interview to CNBC-TV18 spoke about the likely legal hurdles the government will have to cross to go through the deal.

First, with regards to the 10 percent cap per company, which is a prudential cap, and so LIC will have to seek permission from Insurance Regulatory and Development Authority (IRDA) to give the insurer a time period within which to comply.

Another one is fiduciary duty of the insurance company, which is LIC. Is it right for them even if it is legal to actually purchase these shares which are quite worthless today?

When asked if the RBI would give its approval, he said, “This theoretical conflict issue is not large because LIC is holding stake in pretty much every listed company in India – be it private , public and they would be in most industries, so not worried about that.”