LIC rejigs investment dept panel gets more powers

The country's largest stock market investor, Life Insurance Corporation (LIC) of India, has made some critical changes in its investment department in terms of structure and functioning.

At a time when the insurer’s investment decisions are under the government scanner, these decisions would take away powers largely vested in a single authority—the managing director. Decisions on investments, along with various other responsibilities, have now been distributed among committee members.

After the recommendations of an internal committee set up to probe the investment scam last year, the investment panel, which earlier approved only large investment decisions, now looks into every investment.

 

In addition, every decision on investment has to be accepted by each member of the committee. If any one member opposes a certain decision, then the investment is not made. Also, the number of members in the investment committee has been increased to six from four. Two executive directors from the investment department have been inducted into the committee. The committee already included a government official and three managing directors.

“Earlier, every significant decision was made by the majority. Now any member can veto any decision. With the number of member increased, the responsibility was more evenly distributed,” said a senior official.

Similarly, the investment operations department, entrusted with the daily trading, now has to take a clearance from the “risk monitoring and research management” team.

“The research team has been made more responsible and without any clearance from them, investment decisions are not taken. The idea was to spread out the decision-making powers at various levels so that any one person could not be held responsible in future in case of any disputes,” the official added.

Two years ago, the insurance behemoth reorganised the investment department into three parts - risk monitoring and research, investment monitoring and investment operations. All these three departments have respective heads reporting to two managing directors.

Apart from reorganising the investment department, LIC has also made key portfolio changes in the department over the last few months.

While D Vijayalakshmi has taken over the role of executive dire-ctor (research & managem-ent) in place of P K Molri, S B Mainak was assigned the role of the chief investment officer as executive director, investment operations, in place of N Mohanraj. Similarly, the unit-linked investment products (Ulips) section, a part of investment department, also saw Jaimohan Masil taking over as chief investment officer (Ulip), replacing P H Kutumbe. Also, A K Dasgupta, managing director, took over the investment operation portfolio from Thomas Mathew.

Though the official refused to connect the recent changes to the Central Bureau of Investigation’s ongoing probe into LIC’s investments, he did admit that all these measures were aimed at increasing the transparency of the investment department.

LIC’s investments during 2008 and 2009 came under the government’s scanner last year, after it found a deficit of Rs 14,000 crore in investment income. Consequently, the Central Bureau of Investigation was entrusted with the investigations and probed the role of four senior officials including the former chairman T S Vijayan, Thomas Mathew the managing director (investment), N Mohanraj, former executive director (investment operations) and P Venugopal, former chief of investments.

The investment department, which handles and manages a portfolio of Rs 12 lakh crore, is the largest in the country’s equity and debt markets by a single institution or investor. During 2010-11, LIC’s total investments stood at Rs 1,96,000 crore, of which investment in equity stood at Rs 43,000 crore. LIC’s total investments includes money deployed in share capital, free reserves and debentures or bonds.