NEW DELHI: The central government is
contemplating to align the rules of surplus distribution of Life Insurance Corporation
(LIC) with the private counterparts.
According to reports LIC is allowed the transfer its 5 percent of the surplus to the funds of shareholders and the rest percentage flows into the policyholder's fund in order to pay bonuses on eligible life insurance policies.
The said ratio is 90:10 when it comes to other life insurance companies that are regulated by the Insurance Act.
Sources said that the government of India is mulling to invest in LIC ahead of the planned IPO that is to happen in the fourth a quarter of FY21.
"It's only natural that investors will expect a similar structure. We are working out the details, along with a few other changes," said a government source.
The source said that government would clarify the amount of foreign investment it will allow in the company post listing. LIC is expected to be run by a special dispensation even though 74 percent of foreign direct investment (FDI) is permitted in the insurance business.
According to reports the surplus valuation of the LIC calculated into account business it has already underwritten.
The profit of LIC are being shared between the government and policyholders and now it would profit shareholders and will led to effect existing participating shareholders.
According to government people who have purchased life covers from LIC will also buy shared in the IPO as a portion would be reserved for them as it is going to help from the bonus in coming years.
Earlier Union Finance Minister Nirmala Sitharaman said India's public sector banks are stable now after the prompt corrective actions (PCA) when it was caught in turbulence. Speaking at the Tamilnad Mercantile Bank's (TMB) centenary celebrations in Tuticorin in Tamil Nadu on Sunday, Sitharaman said prior to 2014, the public sector banks were facing various problems. The public sector banks were laden with huge non-performing assets (NPA) which was a serious concern for the future of the banking sector itself. Sitharaman said a problem in the banking sector would impact the entire economic activity.