IRDA chairman for cautious approach to equity investment

New Delhi: “Indian stock markets have taken a severe beating with the advent of globalisation and liberalisation. They are still groping in the dark,” says Insurance Regulatory and Development Authority (IRDA) chairman N Rangachary. “This is the reason why IRDA had stipulated certain prudential norms for investment.”

According to IRDA norms, life insurance companies could invest 40 per cent in government securities and the remaining in other investment instruments, including in equities. However, Rangachary admits that there are certain profile mismatches in the investment horizon of insurance companies considering the tenor of investments.

Only last week did the Reserve Bank of India auction a 20-year paper, otherwise it used to be a 10-year paper, and to that extent assets of these companies are limited, while the liability spreads over more than 30 years, he says. “This is one problem that the life companies have to face.”

On the issue of a regulator for pensions, Rangachary stresses on the need for such a regulator saying that if developments in the insurance sector are any indication, there is a need for a regulator.

But Rangachary evades queries on who should be the regulator but indicates that IRDA could handle the work as he cites that annuity payments are made by life insurance companies. “I do not want to get into that area.” He, however, says he does not agree with the view that the Employees’ Provident Fund Organisation should continue as the pension regulator just because the system has been like that.