Mittal: Funds plan
New Delhi, Sept. 4: The finance ministry may relax investment norms for insurance companies to attract more funds in infrastructure as part of efforts to prop up the economy.
During their meeting with finance minister P. Chidambaram today, the heads of public sector insurers pitched for relaxing investment norms so that they can earn more premium income.
Financial services secretary D.K. Mittal told reporters that the issue of channelising their investments into productive sectors, particularly infrastructure, was discussed at the meeting.
“For that what changes are to be made in the regulations by the government or by the income tax department ... everything has been looked at,” Mittal said.
He, however, said no decision was taken and another meeting would be held shortly.
“This meeting was not for taking decisions. It was basically for understanding, as part of a series of meetings that the finance minister is holding with different groups, key groups, what we can do to prop up the economy,” Mittal said.
According to estimates, the investment corpus with the life insurance companies is around Rs 13 lakh crore. Of this, only 20 per cent currently go towards infrastructure.
Under the current Insurance Regulatory Development Authority (IRDA) norms, insurance companies can invest only in highest rated ‘AAA’ or ‘AA’ credit-rated debt paper.
Life insurance companies are allowed to invest up to 50 per cent in government securities, 15 per cent in infrastructure bonds and 35 per cent in other investment grade corporate bonds and equities.
“There is a need to revisit investment norms for insurance companies. We will look at revising investment regulations over the next month,” IRDA chairman J. Harinarayan said after the meeting.
The regulator is at present mulling options to allow sector companies to invest more in non-AAA rated securities, including ‘A+’ and ‘A’ papers of corporate houses.
Last year, the department of industrial policy had favoured allowing life insurance companies to invest in greater quantity in non-AAA rated debt instruments to encourage flow of funds to infrastructure projects.
India needs about a trillion dollar investment in the infrastructure space during the 12th Five-Year Plan (2012-17).