The fund infusion will enable IDBI Bank to return to profitability and normal lending, and give the government the option of recovering its investment at an opportune time, an official statement said.

The government will provide a one-time recapitalisation of Rs 4,557 crore to IDBI Bank, Mr Javadekar said, adding that LIC will infuse Rs 4,743 crore.

The minister reiterated that as part of the Budget 2019-20, the government provided a support of Rs 70,000 crore for recapitalisation of public sector banks.

LIC has a 51 per cent share in IDBI Bank, whereas the remaining 49 per cent stake is with the government. “In that proportion, both (LIC and government) will contribute to the capital adequacy so that the bank can work efficiently,” the minister said.

LIC's board in July last year approved acquisition of up to 51 per cent stake in IDBI Bank, following which the insurance major raised its shareholding in the lender over the next few months.

At the end of the quarter ended June 30, LIC had a 51 per cent stake in IDBI Bank.

The synergy from the IDBI Bank-LIC merger “really helped” both the companies, he said, adding: “It is a win-win formula.”

“The government is closely watching the developments in the banking sector,” Mr Javadekar added.

Last Friday, the government announced mega merger plans of state-run banks which would more than halve the number of public sector lenders in the system to 12.