New Delhi: The Congress on Saturday objected to what it called the Narendra Modi government's "illegal" and "wrong" move to force the state-owned Life Insurance Corporation to bail out the sinking IDBI Bank.
The main Opposition party even accused the government of resorting to such tricks to dress up its accounts, while asking why the savings of 38 crore LIC policyholders were being jeopardised by burdening them with a Rs 13,000-crore bailout package.
"As per the Insurance Act (Laws and Regulations) 2013 as Amendment 10 of Regulation 5B reads: The maximum exposure limit for a single investee (equity, debt and other investments taken together) from all investment assets shall not exceed... more than 15% of the amount of investment assets in all companies belonging to the group or whichever is lower," the party said in a statement.
The accusations came a day after insurance regulator Irdai allowed the LIC to acquire up to 51 per cent in IDBI Bank. The insurer now holds 10.82 per cent of IDBI Bank.
The LIC, however, will have to get a go-ahead from the Reserve Bank of India and the Securities and Exchange Board of India (Sebi).
Current regulatory norms bar the LIC from holding more than 15 per cent in a company.
The Congress alleged that the government was flouting the Banking Regulation Act, Insurance Regulatory Act, Insurance Act, Insurance Regulatory and Development Authority Act and the Sebi Act.
Both IDBI Bank and the LIC own mutual fund arms, which too is not allowed under Sebi rules, the party said. Both these funds were started much before Modi took over as Prime Minister in 2014.
The party argued that LIC policyholders would have to pay for this bailout package and other such disastrous decisions in the form of lower returns and such financial tricks would only create bigger problems for the economy.
"If this deal goes on, wouldn't the floodgates of similar deals of LIC bailing out public sector banks (PSB) be opened? More than half of the PSBs are having the same precarious financial position; banks have suffered a loss of Rs 87,500 crore in this quarter alone," the statement released by Congress spokespersons Priyanka Chaturvedi and Gourav Vallabh said.
As banks were under unusual stress and non-performing assets were soaring, the party felt that the LIC's equity holding would see an erosion in value, affecting the capability of the insurer to serve policyholders.
"Squeezing the hard-earned savings of the people is the sole motto of the government. It is attacking the common people on multiple fronts. The RBI testified that money parked in small savings schemes has seen a seven-fold drop (in 2017-18) due to reduction of interest rates," the statement said.
It pointed to what it called the government's "malicious intentions" on two counts. First, since the Air India sell-off had "flopped", the government, it said, was "hell bent" on achieving this year's "disinvestment target of Rs 80,000 crore" and using the LIC was the "easiest option".
Second, if it had continued to own IDBI Bank - that is, if the LIC does not bail it out - "it would have had to continue providing capital in the future".
"That obligation now comes down, with LIC also having to provide capital," the Congress said.
The CPM too demanded that the government withdraw its decision to ask the LIC to bail out IDBI Bank.
"LIC is the repository of people's savings in the form of insurance policies. Using this capital to bail out the worst defaulter bank is tantamount to public loot of people's savings...,," the politburo said in a statement.
"This Modi government is forcing a sudden change in the rules. The regulatory mechanism is being destroyed... to protect the rich defaulters from repaying their loans," the party said.
