LIC goes for proactive policy to cover its investment risks

LIC, which is also the country's largest domestic institutional investor, has asked its officials on the boards of companies it has invested in to play a more proactive role as directors especially regarding corporate governance, highly-placed sources told FE.

The concern is that inactive directors could harm the interests of the insurer especially on board decisions that impacts the operation and profitability of target companies. The LIC, so far, has maintained a passive role on the boards of companies, treating its participation more like an investor than an active management partner. The finance ministry also wants LIC to use its investment in companies to improve its overall functioning. "The role of LIC needs to be changed and it should not just be an investor in the market but also one that helps to improve governance in companies," said a finance ministry official.

Last year, the PSU insurer formed a six-member high-level panel (including two of its executive directors, three directors and a government representative) to look into its investments in various companies where it has significant stake-holding. Besides the investment operations and monitoring departments, the company also has a department to assess risks and carry out research

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