August 16, 2013 / 09:39 IST
The Finance Ministry today said the public sector insurance behemoth LIC can increase its investment in companies up to 25 per cent from the current 20 per cent under special circumstances. "LIC's investment norms at the moment is settled at 20 percent but in special circumstances it can go up to 25 percent. In case LIC wants, the board can take this to 25 percent," Financial Services Secretary Rajiv Takru said.
He was talking to reporters on the sidelines of an insurance summit organised by the industry body CII here.
Interestingly, the past IRDA chairman J Harinarayan had opposed the move to increase the equity exposure limit of LIC, saying the move was "imprudent". Earlier this year, the government had proposed to allow LIC to invest up to 30 per cent in a single company.
LIC for long has been perceived as the last resort for the government to meet its divestment target, though the Centre has denied it. Meanwhile, Takru expressed concern over the rising bad loans in the banking system saying "this is a matter of concern."
"If the NPAs go up further, it will be matter of big concern. What we have to do is that we have to bring it down. The banks have been told how to do it and the banks are engaged in it." Takru also asked insurance companies not to mis-sell products with false promises. "What I am trying to say is that insurance companies should be fair and there should not be premium payment denial.
They should not betray the trust," he said, adding the customer is given assurances while buying an insurance product.
On the new bancassurance model, which will allow banks to sell more than one insurer's products, Takru said insurance companies have to comply with the norms of both regulators -Irda and RBI. "For the bancassurance model, the bank has to take permission from both regulators- IRDA and RBI and comply with the rules of both these regulators. There is no case for rise in mis-selling due to this new norms," Takru said.
Referring to the proposed catastrophe fund, he said anything concrete is yet to evolve on this matter. Takru also said the proposed energy pool is likely to be launched soon. "I think, you will hear about it very soon. The fund will be launched with a corpus of Rs 2,000 crore," he said.
IRDA chairman TS Vijayan, who was also present on the occasion, said the regulator cannot force insurers to go public but he encourages it as it can help them to improve profitability. "The regulator cannot force insurance companies to go public. While it has to be noted that listing can ensure profitability, better corporate governance and transparency," he said.
He also emphasised on the importance of small ticket size insurance policies to reach out to the mass in a better manner.
Vijayan said to improve professionalism and productivity and for better penetration, various distribution channels like banks, web aggregators and common service centres are needed. He said the regulator will set up a committee to look into crop and agriculture insurance segments.
