The big names in India Inc, from Reliance to Tata Steel, Larsen & Tourbo and Mahindra & Mahindra, were all relying on the Life Insurance Corporation (LIC) to raise rupee debt through non-convertible debentures, since equities got devalued and overseas debt became expensive. There was pressure on the insurance regulator, IRDA to allow LIC to invest more aggressively in these corporate debt instruments.
However, IRDA told that it was not in favour of relaxing the rules and allowing LIC to invest more aggressively in corporate debt. At present LIC can invest up to 10 per cent of capital employed by the investee company or 10 per cent of the fund size in a coroprate entity, whichever is lower. The capital employed includes share capital, free reserves and debentures or bonds. There was hectic lobbying to hike that ceiling to 20 per cent. Until last year, the rules were a lot relaxed and LIC''s ceiling was up to 20 per cent of the capital employed. IRDA chairman now told that a higher limit might be considered, but only for certain special cases.
However, IRDA told that it was not in favour of relaxing the rules and allowing LIC to invest more aggressively in corporate debt. At present LIC can invest up to 10 per cent of capital employed by the investee company or 10 per cent of the fund size in a coroprate entity, whichever is lower. The capital employed includes share capital, free reserves and debentures or bonds. There was hectic lobbying to hike that ceiling to 20 per cent. Until last year, the rules were a lot relaxed and LIC''s ceiling was up to 20 per cent of the capital employed. IRDA chairman now told that a higher limit might be considered, but only for certain special cases.
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