The quantum of divestment in LIC, which commands balance sheet size of about ₹36-lakh crore, is unlikely to be over 10 per cent, going by the Finance Ministry’s thinking. However, an inter-ministerial committee will take a final call on the modalities of the proposed IPO.
A day after the Budget, Rajiv Kumar, Secretary, Department of Financial Services, who is also the Finance Secretary, said, an inter-ministerial committee will be set up to decide on the roadmap and extent of disinvestment in state-owned insurance behemoth Life Insurance Corporation.
He also asserted that sovereign guarantee will continue on all the policies issued by LIC even after it goes public and gets listed in bourses. Finance Minister Nirmala Sitharaman had in her Budget speech on Saturday announced that LIC will be made public through an initial public offering (IPO).
“The inter-ministerial committee will comprise representatives from the Department of Financial Services, DIPAM, Law Ministry. It will take a call on whether the existing LIC Act should be amended or whether LIC should be converted into a company before taking it public. All such decisions will be taken by this committee,” Kumar said in a post-Budget interaction.
IPO likely in H2
Asked about the timeline for the LIC IPO, Kumar said that effort will be to complete it in fiscal 2020-21, but ruled out on the public float happening in the first half of next fiscal.
“It’s very difficult to give a timeline at this stage or to talk about the quantum of divestment that would be undertaken,” he said adding the entire objective of the LIC IPO will be to bring transparency and allow the gains to be shared with stakeholders.
The Budget has pegged the disinvestment target from stake sale in public sector banks and financial institutions at ₹90, 000 crore. Kumar confirmed that this provision was only for transactions in LIC and IDBI Bank.
Kumar also said that the government has decided to amend the PFRDA Act to bring all pension funds managed by private enterprises within the regulatory oversight of the pension regulator.
“The PFRDA Act will be amended in the ongoing Budget session to empower the regulator. There will now be a unified regulator (PFRDA) who will now have oversight on the pension funds managed by private organisations too besides NPS. This is really a big reform,” he added.
On deposit insurance, Kumar made it clear that customers of banks will not be burdened with any costs for the proposed increase in deposit insurance from ₹1 lakh to ₹5 lakh. “The banks cannot pass it on to customers. The banks themselves will have to bear the additional premium cost, which is unlikely to be more than 2-3 paise.