Corporation Bank: LIC not to hike stake
13 October 2001
Mumbai: The Life Insurance Corporation (LIC) is unlikely to get clearance from the Insurance Regulatory Development Authority (IRDA) for hiking its stake in Corporation Bank from 12.32 per cent to 26.93 per cent. Presently, IRDA stipulates that insurance companies can invest up to a maximum of 20 per cent in any other company.
However, the LIC Act allows LIC to invest up to a maximum of 30 per cent of the equity of any other company - a reason why LIC had signed an MoU with Corporation Bank for picking up 26.93 per cent of its equity.
The conflicting provisions of the IRDA Regulations and the LIC Act appear to have been overlooked when the regulations were drafted. LIC, too, did not bring this anomaly to the notice of IRDA when the regulations were being finalised.
IRDA is not inclined to relax its norms for LIC because other private insurance companies could take advantage of this situation, and breach investment norms and demand relaxation later.
In fact LIC had opted to increase its stake in Corporation Bank in order to take advantage of the banks network of branches for distribution of LICs insurance product as also to leverage the banks treasury and cash management capabilities.