FM Vs IRDA over LIC investment percentage

New Delhi, Nov 20 (TruthDive) : IRDA has taken strong exception to the sanction given to LIC to increase its stake to 25% in listed companies.

As per IRDA-the regulator of all insurance companies,the maximum limit for holding stakes is only 10%. The Finance Ministry(FM) move is seen as putting LIC corpus fund at risk and endangering its policy holders.

IRDA is also peeved that FM has not taken its objections and gone ahead with the move. FM officials said that it had sent the proposal to the Law ministry for detailed study and it got the nod to go ahead. The move is to make LIC make purchase of shares in PSU listed for disinvestment. FM has been struggling to sell the stakes in these PSUs but officials in several ministries have been creating hurdles and till date no share has been sold.

The IRDA 1999 Act controls all insurers and an amendment to it states that no insurance company can invest up to 10% of its corpus fund. To circumvent this, FM will issue a gazette notification that gives it power to govern LIC. The move by FM would allow LIC to invest Rs 50,000 cr in equities and it need not sell stakes in 78 firms where it has stakes a little over 10%.

LIC is only too willing to follow the FM’s orders and is quite relived to be away from IRDA control. LIC officials say that IRDA is not taking a practical approach. It treats LIC on par with other companies with lesser corpus fund.

LIC has a Rs 13, 000 lakh cr base while others are in the Rs 10,000 cr range. The only option for IRDA is to go to the Financial Stability Development Council but here again it comes under FM, so it is not hopeful of any favourable decision. This is the second confrontation of the FM with a regulator. It recently locked horns with RBI over interest rate cut.