Regulations
IRDA slaps Rs6 lakh fine on SBI Life insurance

Imposing a penalty of Rs6 lakh on SBI Life Insurance, the insurance regulator also reprimanded the company that its business practices severely dent public faith

 
New Delhi: The Insurance Regulatory and Development Authority (IRDA) has imposed a penalty of Rs6 lakh on SBI Life Insurance Company for violation of various norms, reports PTI.
 
IRDA has also reprimanded SBI Life saying "... business practices adopted by life insurer (SBI Life) and the intermediaries involved, severely dent the faith of insuring public".
 
The regulator has fined SBI Life for paying higher commissions to intermediaries, which pre-dominantly include State Bank of India and its associate banks.
 
It said SBI Life sold the two-year policy under the Dhanaraksha Plus scheme as a single premium policy. It also did not give informed choice to the insured.
 
As regards premium, the order said, it was paid to corporate agents over and above the eligible 2% commission.
 

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IRDA issues draft IPO norms for general insurance companies

IRDA said no general insurance company shall approach SEBI for public offering without specific previous written approval of the insurance regulator

 
New Delhi: General insurance companies planning to tap the capital market for funds should have a 10 year experience and will have to seek prior approval from the sector regulator, reports PTI quoting draft guidelines issued by Insurance Regulatory and Development Authority (IRDA).
 
"No general insurance company shall approach the SEBI for public issue of shares and for any subsequent issue ... without the specific previous written approval of the Authority," IRDA said in the draft norms for initial public offering (IPO) of non-life insurers.
 
The draft norms -- IRDA (Issuance of Capital by General Insurance Companies) Regulations, 2012 -- states that the regulator would take into account the insurer's financial position, its capital structure and regulatory record before permitting them to come out with the share sale.
 
Further, the IRDA has kept with it the powers to prescribe the extent to which the promoters shall dilute their respective shareholding and the shares that can be allotted to foreign investors.
 
Further, the IRDA would also prescribe the minimum lock-in period for the promoters after the share sale.
 
The IRDA would also look into the purpose for which the insurer is proposing to raise the funds from the market and the insurer's capital structure.
 
"An applicant company proposing to raise share capital through a public issue may do so only on completion of 10 years from the date of commencement of business," the IRDA said, adding that the approval granted by the Authority shall have a validity period of one year.
 
The regulator has also prescribed additional information -- risk factors specific to insurance companies, an overview of the insurance industry and a glossary of terms used in the insurance sector -- in the offer document for companies to come out with share sale offer.
 
The IRDA has invited comments from general insurance companies by 30th September on the exposure draft.
 
Last year, the IRDA had notified the guidelines for life insurance companies to tap the capital market.
 

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STT needs to be used to incentivise investors: SEBI chief

According to SEBI chief Sinha, STT should be used in a manner that investors are incentivised to invest for the long term rather than for short term

 
New Delhi: UK Sinha, chief of Securities and Exchange Board of India (SEBI) has said that securities transaction tax (STT) should be used in such a way that it incentivises people to make investments for the long term rather than reap short term benefits, reports PTI.
 
Sinha, the chairman of SEBI, also said that the STT rate is rather high now.
 
"... (STT) should be used in a manner that people (investors) are incentivised to invest for the long term rather than for short term (speculation)," Sinha told reporters on the sidelines of launch of National Stock Exchange's listing platform for Small and Medium Enterprises.
 
Noting that STT is the prerogative of the government, Sinha said it is not something where the market regulator can take a call.
 
"SEBI's view has been that in securities market, the tax rate is rather high," he noted.
 
According to him, taxes should be across various segments of various markets rather than only in the securities market.
 
NSE Managing Director and CEO Ravi Narain too echoed similar views.
 
Asked about STT, Narain said all asset classes should treated equally for taxation purposes and there should not be any arbitrage between two different asset classes.
 
Market entities and various industry bodies have been strongly demanding a complete abolition of STT, which was lowered earlier this year in the Union Budget.
 
Earlier this month, the government-appointed panel for rationalising the proposed General Anti Avoidance Rule tax regime had suggested a hike in the STT.
 
Portfolio investments in listed securities attract STT at rate of 0.1%. A hike in STT rate would increase costs of equity transactions. The levy was introduced in 2004.
 
In its draft report, the Shome panel said, "The government should abolish the tax on gains arising from transfer of listed securities, whether in the nature of capital gains or business income... In order to make the proposal tax neutral, the government may consider to increase the rate of STT appropriately," the panel, headed by Parthasarathi Shome, had said.
 

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