Nifty99000 100%

Sensex99000 100%

Article rating: 4.3
Article rating: 4.1
Article rating: 4.3
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: 4.0
Article rating: 4.0
Article rating: No rating
Article rating: 3.0


IRDA likely to hike investment limit for insurance firms

Author: PTI/Friday, June 29, 2018/Categories: Insurance

IRDA likely to hike investment limit for insurance firms

New Delhi - The board of insurance regulator Irdai is scheduled to meet on June 29 amid reports that insurance behemoth LIC may pick up a majority stake in state-run IDBI Bank.

The board meeting on June 29 will discuss routine issues, sources said.

It is understood that the Insurance Regulatory and Development Authority of India (Irdai) board may consider hiking investment limit for a particular insurance firm beyond 15% in the interest of policyholders.

As per the present regulation, an insurance company cannot own more than 15% in any listed financial firms.

"In the case of entities from the financial sector, other than regulated or diversified or listed, the limit (for insurance companies) shall be at 15% of the paid-up capital," as per the guidelines for listed Indian Insurance Companies, 2016.

Without fixing a time-frame, Irdai last year had asked LIC to prepare a road map to pare its stake to 15% in firms where it breaches this ceiling.

However, it got some relief from the government as it had giving breathing period for paring stake.

According to the Insurance Act 2015, "Without prejudice to anything contained in this section, the Authority (Irdai) may, in the interests of the policyholders, specify by the regulations, the time, manner and other conditions of investment of assets to be held by an insurer for the purposes of this Act."

Amidst reports of LIC looking to enter the banking space by acquiring majority stake in IDBI Bank, the issue of investment cap of insurance firm assumes significance.

As the government makes efforts to revive the fortunes of IDBI Bank, which is saddled with huge amounts of bad loans, LIC becoming a major stakeholder in the lender could be beneficial for both state-owned financial players in the long run.

While a final decision is yet to emerge on whether LIC would be snapping up over 40% stake in IDBI Bank, official sources said the preliminary contours of such a plan is being worked out.

Earlier this week, a senior finance ministry official had said that both LIC and IDBI Bank have independent boards, which would take a call on the possible deal.

A possible scenario would be the insurance major making IDBI Bank as a subsidiary on the line of its housing finance and mutual fund businesses. According to the sources, there would be business synergies in case the LIC-IDBI Bank deal materialises.

In his Budget speech for 2016-17, then Finance Minister Arun Jaitley had said the process of transformation of IDBI Bank has already started. "Government will take it forward and also consider the option of reducing its stake to below 50%," he had said.

They noted that in a stake sale, the government would not get the proceeds and the money would be utilised for the bank's revival. It could happen through issuance of fresh equity so that the government's stake which is presently at 80.96% would come down below 50% as announced in the Budget.

Print Rate this article:
No rating

Number of views (283)/Comments (0)

rajyashree guha


Other posts by PTI
Contact author

Leave a comment

Add comment



Ask the Finapolis.

I'm not a robot
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest



The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free