Letter to BS: LIC is acting as a proxy for the govt by investing in PSBs

This refers to “Large exposures to PSUs hurt LIC’s returns” (July 19). It is a matter of concern that the LIC is stepping up its investment in public sector undertakings (PSUs) and public sector banks (PSBs), many of which are either loss- making or performing poorly. What is equally disturbing is that it is selling off investments in blue chip and well-performing private companies. 

This is a bit like selling the family silver to buy scrap. It seems that the LIC is involved only with giving higher dividend to the government by selling off its prime investments and acting as a government investment vehicle by investing in government-owned poorly-performing and loss-making banks and companies. It is understood that this is adversely impacting the returns it gets from its investments and ultimately lowering its solvency ratio. 

By investing in loss-making PSBs such as IDBI Bank and continuing to stay invested in loss-making/poorly- performing PSBs and PSUs, LIC is acting as a proxy for the government (helping keep the fiscal deficit low) and permitting it to avoid taking substantive decisions to reform, merge or sell off these entities. These are disturbing signals.

Arun Pasricha  New Delhi

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