LIC will seek RBI and government approval to retain its stake in these banks. The state-owned life insurer holds 14 per cent in UTI Bank and 26 per cent in Corporation Bank.

"We are a 100 per cent government institution and would request the RBI and government to let us hold on to the stakes," said R N Bharadwaj, managing director, LIC.

"Being a wholly owned government company, the stakes we have acquired in private banks tantamount to them being held by the government itself. Therefore, the government as well as the RBI should allow us to hold on to the stakes," he added.

If allowed the leeway, would emerge as the single largest shareholder in UTI Bank after its promoters since HSBC, which holds close to 13 per cent, will have to offload the excess 3 per cent that it currently has.

In Corporation Bank, LIC is already the largest shareholder after the government at 57 per cent.

"In the event of RBI or the government not granting permission, we will only offload the excess stake in the two banks and not the entire holding," a source with the insurance company added.

LIC had, sometime back, increased its stake in UTI Bank to 14 per cent and was planning a strategic tie-up to offer a host of insurance-related services to the bank's customer.

It was also planning to offer premium payment service through the bank's ATMs. The stake in Corporation Bank was aimed at offering value-added insurance services to the banks' customers. LIC has in fact tied up with Corporation Bank and was offering its products through the bank's branches.