IRDAI Enhances Insurers Investment Limit For BFSI Sector To 30%

The move by Insurance regulator Insurance Regulatory and Development Authority of India is seen to facilitate insurers' money flowing to LIC's IPO.

(Representative Image/ Getty)

Mumbai: The government is leaving no stone unturned to make the initial public offering of the insurance behemoth insurance giant Life Insurance Corporation of India (LIC) a huge success.

The Insurance regulator Insurance Regulatory and Development Authority of India (IRDAI) on Friday allowed all Insurers to have exposure to Financial and Insurance activities up to 30% of Investment assets from 25% before.

"The Authority in exercise of its powers conferred under Regulation 14(2) of the IRDAI (Investment) Regulations, 2016, permits all Insurers to have exposure to Financial and Insurance activities up to 30% of Investment assets," said the IRDAI circular adding that accordingly, the limit of 25% of Investment Assets mentioned in Note no. 8 to Reg.9 of IRDAI (Investment) Regulations, 2016 stands revised to a limit of 30% of Investment Assets.

This means the insurers in India with assets under management (AUM) of close to Rs 50 lakh crore will be able to invest an additional 5% in the Banking, Financial Services, and Insurance (BFSI) sector.

The unit-linked insurance plans (ULIP) account for a fifth of the total AUMs of the insurance industry and the investments in the BFSI sector is majorly routed through ULIPs.

"Most insurance companies have reached the 25% ceiling cap of investments in the BSFI sector. The enhanced limit will help them the headroom to invest in the LIC IPO," a banking source told ABP News.

The insurers will be able to invest in LIC's IPO under the institutional category.

Despite a reduction in IPO size, LIC's upcoming offering would be the largest in India's capital market history. LIC wants to raise Rs 20,557 crore through the sale at the highest ceiling of Rs 902-949. This would make LIC the first company to issue a Rs 20,000-crore IPO. The IPO, which will be listed on May 17, will have a market capitalization of Rs 6 lakh crore, which is likely to be the largest for any stock at listing.

The offering will result in the sale of 22.13 crore shares by the government. The anchor book will open on May 2, followed by the retail issue two days later. The bid will be accessible to the public on May 4 and will close on May 9.