M SaraswathyMoneycontrol News
Life Insurance Corporation of India (LIC) has said that its decision to exceed the equity investment cap in some companies including Corporation Bank and ITC was a strategic move and should only be considered an exception."We have exceeded 15 percent in two companies," LIC Chairman VK Sharma told Moneycontrol. "However, these are strategic investments for us."
The regulator allows insurers to hold only up to 15 percent stake in one company.
Earlier this month, the government divested 2 percent of its stake held in ITC held through the Specified Undertaking of the Unit Trust of India (SUUTI). LIC bought this 2 percent taking its overall shareholding to 16.32 percent.
There were some concerns about LIC breaching the maximum permissible limit of 15 percent. However, LIC officials clarified that this is not the new normal.
"This was an important divestment from the government perspective and hence this is an exceptional case," said a senior LIC official. "We will continue to be guided by the investment norms in all other cases."
During the tenure of J Hari Narayan, the previous chief of the Insurance Development and Regulatory Authority of India (IRDAI), there were some differences on the investment cap applicable for LIC.
IRDAI had then clarified that investment caps apply to all insurers.
The regulator has prescribed norms for equity investments in a company based on the size of the insurer. It ranges from 10-15 percent depending on the funds controlled by an insurer.
As per the LIC Act, the insurer can invest upto 30 percent in a company. LIC has, on various occasions, lobbied for increasing the limit of holding equity stake in a company.
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