Irda sticks to its guns, tells LIC to comply with new norms

Written by Banking Bureau | Hyderabad, Mumbai, Aug 28 | Updated: Aug 29 2008, 05:57am hrs
The Life Insurance Corporation of India (LIC) has to abide by the new set of investment norms announced by the Insurance Regulatory and Development Authority (Irda) recently. The modalities can be worked out in such a way that it does not affect the interest of the customers and the market sentiments, said CR Muralidharan, Irda member.

Speaking on the sidelines of an event organised by the Oriental Insurance Company and MyTVS, he said, Irda last week had come out with new investment norms for insurance companies. "The idea behind the new investment norms was to bring in equality among all the players in the industry. LIC has been the leader in the life insurance business. But now, private life insurance companies are also doing well and in fact hold about 40%-45% of the market share. LIC, now, has to comply with the new norms. But we can sit across the table and speak in detail as to how it should bring down its stake to 10% in other companies and by when."

As per the new investment norms, no insurance company is allowed to invest more than 10% of its total fund size or 10% of the outstanding shares of the investee company, whichever is less, in any company.

However, the investment of LIC in other companies, including Corporation Bank, MTNL, ITC and Reliance Infra is much over the prescribed limit of 10%.

LIC, the largest institutional player in the country earlier had said that it would move the ministry of finance and Irda to seek changes in the insurance regulator's new norms on investment, which will have a wide-ranging impact on the equity and debt market.

A senior officer had told FE that the corporation is studying the new norms and would present its argument before the MoF and Irda for seeking relaxation of norms. Though Irda had consulted LIC while preparing the new set of guidelines, the revamped guidelines as announced by Irda have caught LIC on the wrong foot. Earlier, even LIC had invested 30% in some companies with special permission from Irda.