FinMin to notify 30% investment cap for LIC

FinMin to notify 30% investment cap for LIC

The government will soon notify the increased equity exposure limit for LIC to 30 per cent following green...

The government will soon notify the increased equity exposure limit for LIC to 30 per cent following green signal from the sectoral regulator Irda, a top Finance Ministry official has said. "The issue (of increasing equity investment cap for LIC from 10 per cent in a listed company to 30 per cent) has been taken up with the regulator and it will get notified soon. It was addressed to Irda at the last broad meeting," Financial Services Secretary Rajiv Takru said, after the board meeting of the insurance giant. Justifying the decision to treble LIC's investment limit, Takru said the Corporation was sitting on trillions of rupees which have to be invested.
"There is an urgent need to develop an in-house capacity for proper assessment of investments. This is also needed to ensure that LIC can meet expectations of its policyholders", he added. As part of its efforts to meet the Rs 30,000-crore divestment target, the government last November had trebled the investment cap of LIC to 30 per cent from 10 per cent. However the then Irda chairman J Harinarayan opposed the move. Harinarayan went on public with his opposition saying the move is "imprudent" and would trigger take-over code norms under the existing Sebi norms, which in turn would make the insurer a majority stakeholder in companies which are not directly related to its core business. Besides, he argued that insurance and pension funds should be "conservative" in corporate investment unlike VCs that are allowed by Sebi to invest up to 30 per cent in a single company. According to new takeover code, any company acquiring 25 per cent in a firm has to make open offer for buying 26 per cent from the (small investors) public. LIC has been the last resort for the government to salvage its divestment efforts. For instance, when the government sold 5 per cent in ONGC last year, it was LIC that came to the rescue of the issue at the last minute. By February, meanwhile, Irda allowed LIC and other large private insurers could invest up to 12-15 per cent in a listed company, depending on the size of the controlled funds. While nearly all private insurers have most of their investments in unit-linked funds, LIC has over Rs 12.5 lakh crore in traditional funds.
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