The finance ministry had been in the process of finalising the new candidate since late December, and wanted to appoint someone from the industry to help gain better evaluation of risk and industry dynamics. In an unprecedented move in May 2011, the ministry had demoted Vijayan to managing director. Although Vijayan completed his five-year tenure as the LIC chairman last year, he had two years until retirement and hence was expected to receive an extension.
But the ministry did not consider Vijayan again and he was asked to continue as one of the three managing directors. DK Mehrotra who was working under Vijayan was later appointed as chairman.
Vijayans demotion in 2011 coincided with the cash-for-loan scam that broke out in LIC in November 2010. The CBI had arrested LIC Housing Finance CEO RR Nair for approving loans after taking bribes.
The Central Vigilance Commission (CVC) had already given a clean chit to Vijayan for this post in January after the finance ministry had more or less confirmed his appointment.