India’s largest life insurance company, the Life Insurance Corporation (LIC) of India is in great dilemma over the new issued guidelines of insurance regulator – Insurance Regulatory & Development Authority (IRDA) – over eliminating the differences between LIC- the public sector companies and private sector insurance, as some of the earlier norms were not imposed on LIC.
IRDA in the latest released guidelines has mentioned that it is mandatory for all insurance companies to hold their maximum 10% equity in any company while LIC had special permission to invest its more than 20% equity in some company.
LIC that is also the biggest institutional player of the company holding Rs.7.5 lakh-crore of investment is now pondering to appeal Ministry of Finance and IRDA to review these fresh guidelines before imposing.
LIC has argued that this move of IRDA would not hurt the insurance companies but the equity and debt market, as IRDA have also allowed all the insurance firms to invest 3% of their total instable corpus or 10% of the fund’s size whichever is lower into Venture Capital (VC) funds- An investment fund that manages money from investors seeking private equity stakes in small- and medium-size enterprises with strong growth potential.
IRDA, as per the sources, was preparing to implement fresh guidelines from next Friday. It has said in response to LIC’s annoyance that IRDA had consulted with LIC while preparing the guidelines. Moreover, it would not destabilise the system, it added.
The private sector insurance company on the other hand is pleased with the new issued norms of IRDA, as it would now be easy for the private firms to manage their corpus more efficiently.
According to fresh norms of IRDA, “10% of outstanding shares (face value) or 10% of fund size, whichever is lower, can be invested in equity shares of Investee Company. A sum of 10% of subscribed share capital, free reserves and debentures / bonds of investee company or 10% of fund size, whichever is lower, can be invested in debt instruments of investee company.’
This new norms of IRDA will allow the private insurance firms to allocate their corpus more widely.
IRDA has also set the norms for investment in mutual funds, IPOs and debt instruments and also in money market.
|
|
Comments:
