IRDA wants to cap LIC exposure
The Irda has urged the finance ministry not to allow LIC to take equity exposure of more than the stipulated norm of 10% in the paid-up capital of any company under any circumstance, however special.
By Debjoy Sengupta, TNN |
KOLKATA: The Insurance Regulatory & Development Authority (Irda) has urged the finance ministry not to allow Life Insurance Corporation of India (LIC) to take equity exposure of more than the stipulated norm of 10% in the paid-up capital of any company under any circumstance, however special.
The prudential guidelines framed by Irda stipulate a maximum 10% investment cap in any company’s equity. However, there is also a standing order of the government that allows LIC to hold up to 30% in a company’s equity, under special circumstances. “IRDA wants the standing order to go,” said Irda chairman C S Rao.
Talking to ET, Mr Rao said: “The government is taking a relook at the Insurance Act and related ones like the LIC Act. It intends to amend these to suit the requirement of the present times. We have, therefore, put forward our recommendations to the finance ministry.”
“There are instances when the government has given special permission to LIC for investing beyond the Irda-specified norms in the equity of a company. For example, LIC had taken about 26% in Corporation Bank,” Mr Rao said.
“The Centre has, from time to time, used the provision and LIC has built up exposures in certain industries and companies way beyond the Irda-prescribed ceiling. We want that LIC should also stick to the rules just like anybody else,” he said.
Not without reason. LIC currently has about 19 crore policyholders and the total sum assured plus bonus etc. is around Rs 4.7 lakh crore as on March 31, 2006. It’s a huge obligation and therefore, IRDA feels that it would be best for LIC not to increase its risk profile.
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