The Union cabinet has approved a Rs 9,300-crore cash infusion into the loss-laden IDBI Bank, which was taken over by LIC in January.

As the majority shareholder with a 51 per cent stake, LIC will contribute Rs 4,743 crore to the sum, while the government will infuse Rs 4,557 crore into the bank as its share on a one-time basis.

Announcing the decision after the cabinet meeting, information and broadcasting minister Prakash Javadekar said the funds would complete the process of IDBI Bank’s turnaround and enable it to resume normal lending.

He said the net NPA of the bank has reduced considerably to 8 per cent of assets in June 2019 from 18.8 per cent a year ago. The government’s stake in the bank is 46.46 per cent, while LIC holds 51 per cent.

After this infusion, IDBI Bank expects to raise further capital on its own and come out of RBI's Prompt Corrective Action (PCA) framework sometime next year.

“This cash neutral infusion will be through recap bonds. The government will infuse capital into the bank and the bank will buy the recap bond from the government the same day, with no impact on liquidity or current year’s budget,” he said.

In August last year, the cabinet approved the acquisition of a controlling stake by Life Insurance Corporation (LIC) as a promoter in the bank through a combination of preferential allotment and open offer of equity.

Shares of IDBI Bank on Tuesday jumped nearly 8 per cent after the government approved the fund infusion.