Insurance Regulatory and Development Authority (IRDA) today said that 10 year lock in guideline does not apply for Reliance Life Insurance s 26% stake sale to Japan-based Nippon Insurance, reports CNBC-TV18.
Reliance Life, a subsidiary of Anil Ambani-controlled Reliance Capital, is likely to net $680 million (Rs3,062 crore) once the deal is completed. Reportedly, this will be among the biggest offshore investments in an Indian insurance company.
Under insurance laws, promoters of life insurance companies looking to offload 26-per cent stake (maximum permissible limit) of their holdings, can do it only after completing 10 years of operation.
However, Reliance will meet that in 2012. "This law applies only in cases of stake divestment and the regulator will soon come out with guidelines for induction of new promoter, " IRDA chairman J Hari Narayan told CNBC-TV18.
He is of the view that some companies are witnessing contraction in business due to lack of capital, and hike in foreign in direct investment (FDI) from 26 per cent to 49 per cent will enable better growth.
In addition to this, he elaborated that insurance companies need only Securities Exchange Board of India (Sebi) and IRDA approval to list shares in the market before completion of 10 years, and not separate government nod.
Talking about Reliance Industries's (RIL) acquisition of Bharti group s stake in Bharti AXA life, he asserted "views on this deal will be given by year end."