The Insurance Regulatory and Development Authority of India (Irdai) has allowed insurers
to be part of the Joint Lenders’ Forum (JLF), formed under Reserve Bank of India (RBI) guidelines for loan accounts that could turn non-performing assets (NPAs).
“Through this mechanism, insurers
may take need-based exposure with the prior approval of the insurer's board which may be in excess of exposures permitted under extant Irdai
Investment Regulations,” said the circular that has been sent to insurers.
However, officials said that except large insurers
such as the Life Insurance Corporation of India (LIC), other insurers
might not be an active member in the JLF. RBI had framed new rules to enable commercial banks to form JLFs to detect stress early and provide support to troubled companies.
Banks had been told that as soon as an account is reported by any of the lenders to the Central Repository of Information on Large Credits as ‘special mention account 2’, they should mandatorily form a JLF
if the aggregate exposure of lenders in that account is Rs 100 crore and above.
Now that Irdai
has allowed insurers
to also be a part of this process, it is expected that they would also play a big role in reducing the stressed accounts. The JLF
can explore various options to resolve the stress in the account. The intention is not to encourage a particular resolution option — restructuring or recovery — but to arrive at an early solution to preserve the economic value of the underlying assets as well as the lenders’ loans.