Siddhartha Mohanty,chairman,Life Insurance Corporation
According to the LIC chairman, so far as investment scope for insurance companies are concerned, it is highly regulated. So, new asset class should also be allowed, like your sovereign gold bond, equity derivative, all these things should also be allowed to insurance companies so that there will be more liquidity
Mumbai:
Life Insurance Corporation (LIC) chairman Siddhartha Mohanty on Thursday said the insurance companies should be permitted to invest in new asset classes like sovereign gold bonds and equity derivatives to enhance liquidity and the corporation is ”in active discussion” with the Reserve Bank of India(RBI) to get access to the national debt database CRILIC managed by it .
Central Repository of Information on Large Credits (CRILICS) is an RBI-run database of credit exposures of various lenders including those towards non-performing borrowers.
Most of LIC’s debt investments are in central as well as state governments’ debt securities, said Mohanty at an economic conclave organised by SBI here.
The LIC chairman said that not having access to CRILIC data is a risk for the insurer as its liabilities are long-term while assets are short-term.
The lack of access to CRILICS tilts the balance negatively towards LIC, Mohanty said, adding that he is optimistic that the central bank will allow the much-needed access to this database as the discussions with the regulator has been smooth and positive so far.
”It’s an irony that despite being the largest debt investor, we don’t have access to debt or the national debt database CRILIC. We are in active discussion with the regulator for the same and are confident of getting that access,” Mohanty said.
According to Mohanty, so far as investment scope for insurance companies are concerned, it is highly regulated. So, new asset class should also be allowed, like your sovereign gold bond, equity derivative, all these things should also be allowed to insurance companies so that there will be more liquidity.
Mohanty suggested that there should be regular interaction among all regulators along with market participants to establish a comprehensive framework on investment issues for resolving numerous operational challenges.
“There is a need for more long-term securities to align with insurance companies’ asset-liability management strategy, given the inherently long-term nature of their liabilities. The central government introduced the 50-year tenor security in its borrowing calendar for the second half of the current financial year, fulfilling a long-standing demand by life insurance companies, particularly the LIC. The government plans to raise a total of Rs 0,000 crore through these securities. Long-term paper, they (the RBI) have helped us. Earlier, we got some 40-year, 50-year paper but more such papers will be required because our asset-liability management, our liabilities are long-term,” he said.
When asked about LIC’s exposure towards non-government securities and state bonds, he told PTI that the company has over Rs 3 lakh crore of exposure to corporate debt. While the insurance company’s equity exposure is over Rs 10.5 lakh crore, its total investments are over Rs 45 lakh crore.