No timeline has been fixed to reduce LIC share in IDBI Bank: Nilesh Sathe, IRDAI
Nilesh Sathe, Member (Life), IRDAI, said that LIC's plan to increase its stakes in IDBI Bank should be treated as an investment scheme rather than an acquisition plan by the insurer, adding that no timeline has been given to reduce LIC share in IDBI Bank but its board will be responsible for the same.
Nilesh Sathe, Member (Life), IRDAI, in an exclusive interview with Zee Business's Anurag Shah said that LIC's plan to increase its stakes in IDBI Bank should be treated as an investment scheme rather than an acquisition plan by the insurer. He added, no timeline has been given to reduce LIC share in IDBI Bank but its board will be responsible for the same. Edited Excerpts
Q: IRDAI has allowed LIC to buy majority stakes of IDBI bank. Should we consider the permission as the acquisition of the bank or an investment scheme?
A: This is a type of investment. It must not be considered as a form of acquisition of IDBI. Investment rules say that you need a permission from IRDAI to invest more than 15 per cent stakes in any listed company.
Q: There is a timeline of 5-7 years in which LIC will have to reduce its stake back to 15 per cent. What is the real definition of timeline? Can it go up or down?
A: It is not so. We have not prescribed any timeline for LIC. It is its board that will make a decision on the time by when the percentage of stakes should be brought down back to 15 per cent. But it can't continue for eternity. Secondly, it should do it in such a way that the market doesn't get disturbed. So, they should take a call at an appropriate time.
Q: Are you are saying that there is no such defined timeline?
A: I haven't said that there is no timeline for the same. Its board will take a call and inform us about the same but we have not prescribed a time, but they must bring it down in two or three or five years.
Q: So should we consider that other insurance companies can also approach IRDAI with a proposal to increase stakes by over 15 per cent?
A: Yes. We never said that this dispensation is reserved just for LIC. According to insurance regulation, any company with assets value of Rs 50,000 crore can have 10 per cent stakes of a listed company, while company's with assets between Rs 50,000 crore and 2.50 lakh crore can hold up to 12 per cent stakes. Similarly, company's with asset value above 2.50 lakh crore can hold 15 per cent stakes in a listed company. But they will need IRDAI's permission to increase their stake percentage above the defined limits. For the purpose, they will have to justify the reason for which they want to go beyond the prescribed limits.
Q: Earlier, the authority decided to implement a code of stewardship for the insurers under which they would have had a clear policy on voting and disclosure of voting activity. By when the stewardship code will be regulated?
A: Stewardship Code will be implemented from April 1. We have included the materiality concept in it but it does not mean that the insurance companies will have to provide full disclosure even if it holds 100 shares in any listed company. We have said that the board of directors of the company will decide that in which circumstances they will use the right to vote in case of their investments in those companies. This voting rights may go in favour or against or be neutral.
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Q: What kind of steps are being taken to increase the penetration of the insurance sector in India? Do you think that the growth in the insurance sector is here to stay?
A: See, both penetration and density are increasing in India. The 2017 figures show that both life and general insurance sector has increased significantly in India. In fact, the non-life or general insurance density went up by 20 per cent against 2 per cent global growth. I feel that insurance penetration will increase with time.