The Insurance Regulatory and Developmental Authority (IRDA) is “actively considering” to relax the 10 per cent ceiling on equity investments by insurers in a company, Chairman Mr. J Hari Narayan has told.
The move is expected to not only bring in the much needed long term funds into equities. But also offer greater investment flexibility to LIC of India (Life Insurance Corporation of India), India’s largest life insurer.
Mr. J Hari Narayan said, “A lot of suggestions have been made in this regard & we are actively considering them. The finance ministry & various other arms of the government, including the Planning Commission, had raised the issue of 10% ceiling"
LIC had recently come under the regulator’s scanner for exceeding the investment limit in 78 companies.
When asked if the regulator IRDA was planning to allow only LIC to buy more than 10% equity in a company, Narayan said IRDA “was looking at the overall investment norms for all insurers”. But he did not say what would be the relaxation, if any, and when would it happen.
A government official said , ''We had sought a special dispensation for LIC since the Life Insurance Corporation Act of 1956 allows the insurer to acquire up to 30% equity in companies after government approval. We have made a case. We feel that at least in case of LIC, which has a huge investible corpus, the limit should be extended.”
Among the companies in which LIC has above 10 per cent equity holding are L&T, ITC, JSW Steel and MTNT (Mahanagar Telephone Nigam Limited).
The insurer’s high stakes in companies had raised concerns after it recently picked up 4.4 per cent equity in an auction conducted by ONGC Ltd, which took its total holding in the explorer to 9.5%.
LIC plans to invest 15 per cent of its corpus, or neraly Rs. 45,000 crore, in equities in the current fiscal. It had invested about Rs. 49,960 crore in 2011-12.
Src: ET
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