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Nod to 20 I in LIC

  • Category
    Economy
  • Published
    25th Apr, 2022

Context

The cabinet recently approved a proposal to allow up to 20% foreign direct investment (FDI) in Life Insurance Corporation of India (LIC) through the automatic route, a move that will facilitate the insurer's upcoming initial public offer (IPO).

About

Key Notes:

  • At present, the FDI policy does not prescribe any specific provision for foreign investment in LIC which is a statutory corporation established under LIC Act, 1956.
  • LIC is fully owned by the government.
  • It was set up in 1956.
  • It has the biggest share in India’s insurance business.
  • The policy permits FDI in insurance companies and intermediaries or insurance intermediaries in the insurance sector.
  • The FDI ceiling for public sector banks is 20% on the government approval route.
  • While the government had last year raised the FDI limit in the insurance sector to 74% from 49%, it did not cover LIC that is governed by a specific legislation.
  • Since LIC does not fall in any of these categories and no limit is prescribed for foreign investment in LIC under the LIC Act, the government has decided to allow foreign investment up to 20% for LIC and other corporate bodies.
  • In order to expedite the capital raising process, such FDI has been kept on the automatic route, as is in the case of the rest of the insurance sector.
  • The government expects to mobilize Rs 63,000-66,000 crore from the proposed share sale to meet its disinvestment target of Rs 78,000 crore for FY 2021-22.
  • In most contexts, disinvestment typically refers to sale from the government, partly or fully, of a government-owned enterprise. 
  • A company or a government organisation will typically disinvest an asset either as a strategic move for the company, or for raising resources to meet general/specific needs.
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