| Meanwhile, the Centre has agreed to give up 50 per cent of the dividend it receives each year. These funds would form part of reserves, and would be earmarked solely for LIC's overseas expansion plans. |
| "The government has agreed to allow us to retain 50 per cent of the dividend for investment in foreign operations," R N Bhardwaj, chairman LIC told Business Standard . |
| The funds will be utilised for expanding LIC's presence in Saudia Arabia. LIC's Fiji operations are also looking at opportunities in New Zealand. |
| The capital infusion by the Centre has been imperative for LIC's overseas foray since the Insurance Regulatory and Development Authority (Irda) does not permit the state corporation to utilise policyholders' funds as investment capital for new operations. |
| With LIC permitted to retain part of the dividend, this means for the year ended March 2004, where the exchequer would have received Rs 540 crore from the state life corporation, it would receive about Rs 260 crore, as LIC has been allowed to retain Rs 280 crore. |
| This is the first time that the government has decided to forego part of its revenue through dividend income even as it is facing a higher fiscal deficit of 4.7 per cent. |
| LIC has identified a sum of about Rs 700 crore to expand its overseas operations, which will be part funded through the government giving up 50 per cent of the dividend income. Every year LIC pays 5 per cent dividend to the government from the surplus funds. This is in lieu of the original Rs 5 crore capital infused by the government. |
| The central government fresh investment into LIC's foreign operations will add to its dividend income since it receives a portion of the proceeds (5 per cent as per the LIC Act) as dividend and the balance 95 per cent of surplus funds goes to overseas policyholders. |
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