State-owned Life Insurance Corporation has recorded a better performance on the net NPA ratio metric on its debt portfolio in 2020-21, partly aided by increased overall provisioning. For 2020-21, the net NPA ratio has come in at 0.05 per cent, against 0.79 per cent in 2019-20.
This improvement on the net NPA ratio on its debt portfolio may spell some good news ahead of the LIC’s initial public offering, which could hit market in fourth quarter this fiscal. The equity investment portfolio of LIC is, however, several times the size of its debt portfolio.
On its debt portfolio of ₹4,51,303 crore, LIC had made provisions of ₹ 34,934.97 crore towards NPA and ₹2,406 crore towards standard assets, taking the overall provisioning to ₹ 37,341.60 crore for 2020-21, the latest LIC annual report for 2020-21 showed.
IRDAI guidelines
Gross NPA ratio of LIC for 2020-21 stood at 7.78 per cent, lower than 8.17 per cent earlier. For 2020-21, the sub-standard assets in its debt portfolio stood at ₹254.37 crore, doubtful assets at ₹20,369.17 crore and loss assets at ₹14,506.35 crore. An amount of ₹34,934.97 crore is provided as per IRDAI guidelines in the books of accounts towards non-performing assets, the annual report said.
It maybe recalled that the government had earlier this year amended the Life Insurance Corporation Act, 1956, to facilitate the listing of LIC.
According to the amendment, the Central government will hold 75 percent equity in LIC for the first five years after the IPO, and then, subsequently, it will hold at least 51 percent. The government currently owns a 100 percent equity stake in LIC. The authorised share capital of the LIC would be ₹25,000 crore divided into 2,500 crore shares of ₹10 each, as per the amended legislation. As much as 10 percent of the LIC IPO issue size will be reserved for policyholders.