Page 15 - Insurance Times September 2020

LIC of India

News

LIC eyes HDFC model for "This model will help the bank if in fu- umbrella approval for off-loading up to
ture it becomes independent of LIC, 25 per cent of the LIC equity in several
housing loan biz at IDBI
after dilution of stake, and wants to tranches. According to sources, this
Life Insurance Corporation (LIC) is look- restart home loans. Once the LIC IPO can help the government approach
ing at the HDFC model, where IDBI happens and IDBI Bank comes out the market when required to achieve
Bank will distribute loans of LIC Hous- PCA, we will continue to have a part- minimum public shareholding.
ing Finance (LIC HF) to comply with nership but we would like to give them
RBI guidelines. The corporation is not the independence to act on their The government plans to come out
keen on a merger of the two and with the IPO during the second half of
own," said Kumar. the current fiscal. The amendment to
wants to keep its options open.
According to a report by ICICI Securi- the LIC Act is required to achieve at
LIC chairman M R Kumar said the in-
ties, LIC Housing Finance franchise is least three objectives - list the insurer
surance giant was happy with the still a major strength despite concerns as a corporation and not as a company;
progress made by IDBI Bank, in which
on leverage. expand its paid-up capital, and ensure
it has 51% stake, as it had reported
that it continues to give sovereign guar-
profit for two successive quarters and LIC Act likely to be antee to policyholders. Listing the in-
has emerged as the largest
bancassurance partner for the insur- amended to facilitate pub- surer as a corporation and not as com-
ance giant within a short time. lic issue pany is key to providing sovereign guar-
antee; this will be a problem if LIC is
"If they come out of RBI's prompt cor- The government is likely to move a Bill under the Companies Act, 2013.
rective action, it will make a difference in the forthcoming monsoon session of
to their banking operations. We are Parliament to amend the Life Insur- The LIC Act envisages that "The sums
working on that. The RBI has given assured by all policies issued by the
ance Corporation (LIC) Act, 1956. Corporation, including bonuses de-
approval subject to the condition that
This amendment, being prepared by clared in respect thereof and, subject
we bring down our stake in 12 years.
They have also said that the bank or the Department of Financial Services to the provisions contained in Section
LIC have to cease housing finance," (DFS), will facilitate the Initial Public 14, the amounts assured by all policies
said Kumar. Offering (IPO) of the country's largest issued by any insurer, the liabilities
life insurer. It will also enhance its paid- under which have vested in the Corpo-
Kumar said that LIC does not want ei- up equity capital. ration under this Act and all bonuses
ther institution to lose out. "How can declared in respect thereof, whether
we ensure that both continue... We The process to appoint merchant bank- before or after the appointed day,
will figure this out in one or two weeks. ers has already been initiated. Accord-
They will continue their operations and ing to sources, the DFS is working on a shall be guaranteed as to payment in
cash by the Central Government."
LIC HF will continue to provide loans," note to the Cabinet. The Cabinet may
said Kumar. also consider a tagged proposal to give LIC's original capital was Rs. 5 crore.

The Insurance Times, September 2020 13