Page 9 - Insurance Times August 2018
P. 9
LIC of India News
LIC to hike stake in IDBI Life insurance sector NPAs rise by 26%
Bank through policyhold-
ers' accounts Despite strict investment norms, NPA's are on rise in Insurance Industry. Non-
performing assets (NPAs) or bad loans of the life in-
According to credit ratings agency surance segment has gone up by 26 per cent from
ICRA the close to Rs 18,000 crore (provisional) in the fiscal
acquisi- ended March 2017 to Rs 22,700 crore (provisional)
tion of a for the year ended March 2018, according to fig-
stake in ures available from the Life Insurance Council.
IDBI Bank
is likely to A major chunk of the NPAs are accounted by LIC. However, as the total asset
base of the industry is currently around Rs 34 lakh crore (provisional) and the
be done under the policyholder's ac- assets under management (AUM) is around Rs 32 lakh crore (provisional), these
counts of LIC and, hence, even a 51 bad loans are not expected to be a major challenge for the sector, said an in-
per cent stake in the bank will not surance sector official, adding, "it is well under control and not a major issue."
make IDBI Bank a subsidiary of LIC.
Total life insurance NPAs are less than half of IDBI Bank's gross NPAs of Rs 55,588
According to Anil Gupta, Head - Fi- crore as of March 2018. Some of the corporate loans extended by the sector,
nancial Sector Ratings, ICRA: "Being mainly LIC, have become NPAs. "There are several factors involved in the in-
an investment in the policyholder's crease in NPAs. The corporate, while availing debt would have factored and
account, the stake will be transient in projected as if the present condition will prevail in the future too and on that
nature and LIC will have to reduce its basis they would have availed the debt. Subsequently there may be changes on
stake in India Ratings and Research account of socio-political and economic conditions resulting in demand and supply
(Ind-Ra) has downgraded IDFC Bank's mis-match leading to a decline in revenue without a corresponding decline in
non-convertible debenture (NCD) rat- other parameters," he said. "In the absence of requisite revenue flow, servic-
ings from 'AAA/RWN (rating watch ing of the debt gets severely affected leading to delay and default in debt ser-
negative) to 'AA+/ Stable'. vicing which results into NPAs."
The downgrade reflects IndRa's ex- "Every year investment portfolio of life insurers is growing at around Rs 3 lakh
pectation that IDFC Bank would take crore," said V Manickam, Secretary General, Life Insurance Council. As of March
longer than expected to build up a 2018, it was around Rs 32 lakh crore (provisional). Out of it, Rs 25.3 lakh crore
granular liability profile, the private (provisional) are relating to public sector insurer and the remaining Rs 6.6 lakh
sector bank said in a stock exchange crore (provisional) are pertaining to all the private life insurers.
notice.
According to the Council, the total investment in central and state government
"The rating action also reflects the securities was Rs 19.42 lakh crore (provisional) which constitute more than 60
bank's limited competitive the bank, per cent of investments. This is over 10 per cent of the mandatory investment
going forward, and bring it down to norms set by insurance regulator IRDAI.
the regulatory requirement of 15
per cent." The sector's infrastructure investment, housing and loans to state government
for housing was Rs 3.84 lakh crore (provisional) for the latest fiscal. Approved
investments such as equity and corporate bonds were at Rs.7.58 lakh crore
(provisional) and other investments are over Rs 1.06 lakh crore (provisional).
The Insurance Times, August 2018 9
