Bank: LIC not to hike stake
Our Banking Bureau
13 October 2001
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.
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.
fact LIC had opted to increase its stake in Corporation Bank in
order to take advantage of the bankís network of branches for
distribution of LICís insurance product as also to leverage the
bankís treasury and cash management capabilities.
of reports on Corporation Bank