Insurance behemoth Life Insurance Corporation of India (LIC) is planning to acquire up to 10 percent equity stake in a company promoted by the National Housing Bank (NHB).
The Board of Directors of LIC on Monday gave their approval to the proposal to invest in the NHB promoted entity that would focus on residential mortgage-backed securities (RMBS), according to a regulatory filing by LIC with the stock exchanges.
RMBS are basically debt-based assets backed by the interest paid on residential loans. RMBS are bonds which are secured against a large pool of residential mortgages (home loans). RMBS are generally considered to be a safer investment than some other asset types.
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RMBS consists of multiple different tranches. These tranches have different credit ratings based on factors like risk and seniority.
Investors in a RMBS are typically paid the interest and principal from the mortgages in the pool each month.
LIC’s board on Monday also approved a revised policy on selection of auditors of the corporation.