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| Irda prohibits insurers from investing in IDRs |
| BS Reporter / Mumbai Jul 02, 2009, 02:29 IST |
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The Insurance Regulatory and Development Authority (Irda) has barred insurance companies from investing in Indian depository receipts (IDRs), saying investments outside the country are forbidden by the Insurance Act.
“An investment in an IDR by any insurer would amount to an indirect investment made outside the country and would not be in compliance with Section 27C of the Insurance Act 1938 that prohibits investment of policyholders’ funds, directly or indirectly, outside the country,” Irda said in a circular.
IDR is an instrument in the form of a depository receipt created by an Indian depository in India against the underlying equity shares of an issuing company. In an IDR, foreign companies would issue shares to an Indian depository, which would, in turn, issue depository receipts to investors in India.
Now, Standard Chartered is planning to raise Rs 5,000 crore through an IDR issue. The foreign bank has appointed JM Financial and UBS AG as the lead managers for the issue.
“Irda’s move is in line with the Insurance Act. Our first priority is to protect policyholders’ money,” said N Mohan Raj, head of investment, Life Insurance Corporation of India (LIC).
Insurers said that since there were no issues, the guideline was of no use at this time.
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