LIC employees are opposing the stake sale of the government, saying that the money will go in the hands of crony capitalists
The proposed stake sale of the government in the Life Insurance Corporation of India (LIC) through an initial public offering (IPO) has been slammed by the insurer's employee union. The union is planning to go on a nationwide protest till the proposal is rolled back.
Finance minister Nirmala Sitharaman in her Budget speech on February 1 had announced that LIC IPO will be a part of the disinvestment policy.
It is likely that the IPO will come out in the second half of FY21 via a 10 percent stake sale by the government.
LIC is 100 percent owned by the government of India and is the country's largest insurance company as well as the largest institutional investor. It has 1,30,000 employees on its rolls.
Rajesh Nimbalkar, General Secretary of the All India National Life Insurance Employees Federation, told Moneycontrol that LIC is the most trust-worthy financial institution in the country.
"Why does the government need to sell its stake and give it to crony capitalists? LIC is not a loss-making institution but gives almost Rs 2,600 crore dividends every year to the government," he said.
Nimbalkar added that the life insurance giant has also been able to buy stake in ailing public sector bank (IDBI Bank) that have been ridden with non-performing assets. He questioned the need to sell stake when LIC is working purely in public interest.
"Employees are walking out and protesting all over India outside the LIC offices. This will soon become a mass movement because the general public will also oppose it," he added.
The disinvestment and subsequent IPO will need an approval from the Parliament. This will then go to the LIC Board and the insurance regulator which approves all IPOs in the sector. A final clearing will be required from market regulator, Securities and Exchange Board of India (SEBI).
For the April to December 2019 period, LIC collected new premiums of Rs 1.37 lakh crore, showing a 45.5 percent year-on-year (YoY) rise. In fact in one month (December 2019), LIC wrote Rs 16,861.98 crore.Despite the insurance industry having been privatised in 2000, LIC still remains the largest life insurer with 70.52 percent market share (by premiums as of December 2019). It is the only insurer offering sovereign guarantee meaning that the policyholders funds are completely secure. This is the reason that LIC policy premiums are higher than private sector counterparts.
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