Lic Rules Out Fresh Funding To Ifci

The Life Insurance Corporation of India (LIC) will not fund the ailing IFCI Ltd any further. "We have reached the investment limits set by the insurance regulator in terms of extending funds to development financial institutions (DFIs)," said a senior LIC official.

The beleaguered IFCI had sought an additional Rs 2,500 crore long-term funding from the cash-rich LIC on the terms and conditions offered to the National Highway Authority of India, which has a 20-year tenure.

The government had cleared a Rs 1,000 crore line of credit for IFCI in August 2001. However, with IFCI's repayment obligations falling due in April and September this year, the cash-strapped institution is seeking additional assistance from banks and other FIs.

 

Senior LIC officials said the corporation has already extended Rs 200 crore to IFCI and further assistance is ruled out in keeping with the investment regulations imposed by the Insurance Regulatory and Development Authority (Irda).

The Irda norms state that the overall exposure an insurance company can take to any DFI is limited to 60 per cent of the net worth of the institution, that is, the equity and reserves combined.

LIC has cleared Rs 6,000 crore to NHAI to be disbursed over three years. Said officials: "There is no comparison between IFCI and NHAI. The latter is a triple-A rated corporation, and the loan is backed by government guarantee. Further, the credit is towards infrastructure development and, thus, falls under infrastructure lending".

"It is not our money, but that of the policyholders. We need to ensure safety and adequate returns when we decide to invest the funds," said LIC chairman G N Bajpai.

Aside from NHAI, LIC has also extended loans to other infrastructure entities such as National Thermal Power Corporation, Power Finance Corporation and the Power Trading Corporation among others.