Relaxing insurers’ investment norms on Finance Minister’s card

05 Sep 2012 Evaluate

In an effort to shore up sagging growth of India economy, Finance Minister P. Chidambaram, on Tuesday, conducted a meeting with public sector insurance companies to formulate a strategy for attracting a larger flow of long-term funds into the infrastructure sector. With the chief’s of the public sector insurance entities pushing hard for easing of investment norms to enable higher earnings on premium collection, the changes in investment guidelines that would be required to attract large fund flows into the productive infrastructure sector, now seems to be imminent.

Financial Services Secretary D K Mittal, giving more insights to the issues deliberated in the meeting, underscored that meeting was not for decision- taking but basically for understanding measures that can be taken to prop up the economy, which includes channelizing insurance funds into productive sectors, particularly infrastructure. He also added that, issue’s such as changes to be made in the regulations by the Government of India or by Income Tax Department were also taken on board for discussion.

Furthermore IRDA Chairman, J Harinarayan, after the meeting, too averred the need to revisit investment norms for insurance companies, so that much of funds could be invested in non-AAA rated securities, including ‘A+’ and ‘A’ papers of corporate’s. As per estimates, the investment corpus with the life insurance companies is around Rs 13 lakh crore of which only 20 per cent currently goes towards the infrastructure sector. Moreover, as per the current Insurance Regulatory Development Authority (IRDA) norms, these insurance companies can put their money only in highest rated 'AAA' or 'AA' credit-rated debt paper.