LIC sanctions Rs 6,000-cr loan for NHAI

Mumbai: The Life Insurance Corporation of India (LIC) has sanctioned a Rs 6,000-crore loan to the National Highways Authority of India (NHAI).

It has signed a memorandum of understanding with NHAI, under which the road-builder will get a line of credit for the amount. The insurance major has also granted a Rs 1,500-crore loan to the National Thermal Power Corporation.

The investments have been made under its infrastructure funding obligations, says LIC managing director and acting chairman A Ramamurthy. For the fiscal year 2002-03, the insurer has earmarked about Rs 10,000 crore (about 15 per cent of its total investment corpus) for infrastructure financing.

LICs return on investment has dropped by at least a percentage point over the past year-and-half to about 8.5-9 per cent, even as the average rate of return on its policies came down to about 6 per cent.

The sharp drop in interest rates has hit the countrys top life insurer, too, and it has either discontinued or restructured several of its high-return policies over the past fiscal year. Says Ramamurthy: All the interest assumptions we had last year are no longer valid. We had to restructure policies because of falling yields. We would snip returns on policies according to the interest rate scenario.

In the current fiscal year, LIC will have about Rs 62,000 crore available for investments. Of this, about 60 per cent (50 per cent is mandatory) or close to Rs 38,000 crore will go into government securities and about 9 per cent (nearly Rs 6,000 crore) will flow into equities.

Investments in the corporate sector, including equities, will be about Rs 11,000 crore. The amount available after funding infrastructure will be channelled to social welfare schemes and other projects. In the past year, the corporations investments amounted to about Rs 50,000 crore. It had gross investments of about Rs 4,400 crore in equities and about Rs 30,000 crore in government securities.