Life Insurance Corporation (LIC), the country’s largest life insurer, may now be able to invest up to 20-25% in an entity’s debt offerings, up from the current limit of 15% for both debt and equity investments.
The Insurance Regulatory and Development Authority of India (Irda) has communicated this decision to the finance ministry.
Irda’s recent investment regulations had stipulated that companies with investment assets of Rs2.5 lakh crore and more will have a debt investment limit of 15% of paid-up share capital minus reserves, bonds and debentures.
However, with the new circular, LIC will be able to invest up to 20-25% in debt.
For this fiscal, LIC’s total investment is expected to be Rs2.25 lakh crore, up from Rs2 lakh crore last fiscal. Of this, Rs40,000 crore would be equity investments, up from Rs33,000 crore last fiscal.
T S Vijayan (pictured), Irda chairman, said that the investment percentage varied with sectors. “Investment could be higher in sectors like infrastructure, housing and banking.”
This could mean LIC may get more leeway to invest in proven companies in sectors like infrastructure.
But tweaking of the equity investment limits “was not under active consideration”, Vijayan said.
The 25% debt investment cap would be applicable only to special cases, subject to LIC board’s approval, said Rajiv Takru, financial services secretary who is also on the LIC board, on the sidelines of an insurance industry event.
Takru bemoaned “rampant mis-selling of insurance policies” and exhorted insurers to ensure that the customer clearly understood the details. “Normally, there is only an oral presentation by an agent and then the customer is asked to sign some documents.
There is no time to read.”
Experts said the higher debt investment limit will likely prove a shot in the arm for the corporate debt market. But they called for clarity on whether the new limit would apply only to exchange-traded funds.
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