The Life Insurance Corporation of India's (LIC) plans to hike its equity stake to 26.93 per cent in Corporation Bank have gone for a toss. This follows the investment prudential norms as laid down by the Insurance Regulatory and Development Authority (Irda), capping an insurance company's equity investment in any one company at 20 per cent. LIC chairman G N Bajpai was not available for comment.
LIC had earlier this year decided to increase its shareholding in the bank from 12.32 per cent to 26.93 per cent in its ambition to venture into bancassurance. Incidentally, an earlier LIC Act had permitted the life insurance player to take a maximum exposure in any single company to the extent of 30 per cent.
However, the Irda Investment (Amendment) Regulation, 2001, would override any earlier regulations. Hence, LIC would be permitted to invest up to 20 per cent in the equity capital of a company or 5 per cent of its controlled funds, whichever is less.
Irda regulations supersede all previous Acts, and LIC is thus unlikely to receive any preferential treatment from the Irda, said officials. As such, the government holding in Corporation Bank, which would have been diluted to 56.94 per cent from the present 68.33 per cent, post-allotment of preferential shares to LIC, might not come through. The proposal of selling 2.4 crore equity to LIC through preferential allotment had been finalised at a price of Rs 196 per share, aggregating Rs 470.40 crore. This decision had been approved by the bank's board and its shareholders.
