Need to allow life insurers to invest in non-AAA rated bonds: Govt

Current regulations allow insurance companies to invest only in highest rated ‘AAA’ or ‘AA’ credit-rated debt paper. Of this, a minimum of 75% of debt instruments should have ‘AAA’ rating

New Delhi: The industry ministry is in favour of allowing life insurance companies to invest in greater quantity in non-AAA rated debt instruments, a move that will encourage flow of funds for infrastructure projects, reports PTI.

The Insurance Regulatory and Development Authority (IRDA) is at present mulling options to allow sector companies to invest more in non-AAA rated securities, including A+ and A papers of corporates.

The industry ministry is of the view that such a move would help companies mobilise funds.

“Besides generating more returns for bond holders, it will also widen the investment horizon for insurers and make more funds available to companies that don’t have the highest rating, but are credit worthy,” said a discussion paper on infrastructure financing released by the industry ministry.

Life insurance companies are now allowed to invest up to 50% in government securities, 15% in infrastructure bonds and 35% in other investment grade corporate bonds and equities.

The current regulations allow insurance companies to invest only in highest rated ‘AAA’ or ‘AA’ credit-rated debt paper. Of this, a minimum of 75% of debt instruments should have ‘AAA’ rating.

The industry ministry has also proposed including government securities as part of the ‘AAA’ rating—which denotes highest credit worthiness.

The country’s requirement for infrastructure financing has been pegged at $1 trillion during the 12th Plan (2012-17), up from $500 billion estimated in the current Plan. The government expects half of this investment to come from the private sector. 

The public sector has been the major source for infrastructure investments till date, with the private sector playing an increasingly important role. Around 75% of the investment was contributed by the public sector during 10th Five Year Plan, which has decreased to around 63% of the total investment in 11th Five Year Plan.

User

COMMENTS

Param

6 years ago

"minimum of 75% of debt instruments should have ‘AAA’ rating" - is this by volume or value?
overall, it seems to be a bad move. the investment plan by insurers is anyway an opaque item, these changes will make it more harmful to common public...

RBI raises housing loan limit for UCBs to Rs30 lakh

The RBI on Monday raised the cap on individual housing loan an urban cooperative bank can disburse to Rs30 lakh from Rs25 lakh.  The central bank also raised repayment period for such loans to 20 years

Mumbai: The Reserve Bank of India (RBI) on Monday raised the cap on individual housing loan an urban cooperative bank (UCB) can disburse to Rs30 lakh from Rs25 lakh, reports PTI.

The central bank also raised repayment period for such loans to 20 years.

The housing loan limit for another category (tier-II) UCBs has been increased to Rs70 lakh from Rs50 lakh, RBI said in a statement.

“As announced in the Second Quarter Review of the Monetary Policy 2011-12, it has been decided to permit tier-I UCBs to extend individual housing loans up to a maximum of Rs30 lakh per beneficiary of a dwelling unit and tier-II UCBs to extend individual housing loans up to a maximum of Rs70 lakh per beneficiary of a dwelling unit subject to extant prudential exposure limits,” it said.

It has also been decided to enhance the maximum repayment period of housing loans granted by UCBs (including the period of moratorium or repayment holiday) from the present period of 15 years to 20 years, it added.

The RBI in the half yearly monetary policy review last week had said “...it is felt that there is a need to increase the maximum permissible limit of individual housing loans that can be granted by the UCBs, as also to increase the maximum repayment period for such loans”.

User

MF Global files for bankruptcy protection

MF Global’s fall into bankruptcy was widely speculated after the company posted over $191 million quarterly loss last week. With its huge exposure to European markets, there were also concerns about the firm's creditworthiness amid downgrades by various rating agencies

New York: Ending days of uncertainty, troubled securities company MF Global Holdings on Monday filed for bankruptcy protection, making it the first major American entity to be shattered by the European debt turmoil, reports PTI.

MF Global Holdings and MF Global Finance USA have filed for bankruptcy under Chapter 11—that allows reorganisation of its businesses.

The group has presence in India through various entities including MF Global - Sify Securities India Pvt Ltd and MF Global Commodities (I) Pvt Ltd, according to its website.

MF Global’s fall into bankruptcy was widely speculated after the company posted over $191 million quarterly loss last week. With its huge exposure to European markets, there were also concerns about the firm's creditworthiness amid downgrades by various rating agencies.

As per the court document, MF Global has assets of $100 to $500 million while the liabilities were worth around $10 to $50 million.

MF Global’s largest creditor is JPMorgan Chase Bank, with claims to the tune of $1.2 billion, the filing with the US Bankruptcy Court in the Southern District of New York said.

Going by reports, the company has been bogged down mainly by huge bets on European sovereign debt and was exploring various options including potential suitors.

The entity, run by former Goldman Sachs executive Jon Corzine, is a leading broker of commodities and listed derivatives.

According to its website, MF Global provides access to more than 70 exchanges worldwide.

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Online Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine)