New Delhi: The Finance Ministry is looking at the possibility of relaxing norms for insurance companies to attract more funds for the infrastructure sector as part of efforts to prop-up the sagging economy.
Reeking During their meeting with Finance Minister P Chidambaram Tuesday, heads of the PSU insurers pitched for relaxation in investment norms to help the sector earn more premium.
Talking to reporters after the meeting, Financial Services Secretary D K Mittal told reporters that the issue of channelising their investment into productive sectors, particularly the infrastructure sector, was discussed.
"For that what changes are to be made in the regulations by the Government of India or by Income Tax Department ... everything has been looked at," Mittal said.
He, however said no decision was taken and another meeting would be held shortly.
"This meeting was not for taking decisions. It was basically for understanding, as a part of a series of meetings that the Finance Minister (P Chidambaram) is holding with different groups, key groups, what we can do to prop up the economy," Mittal added.
As per estimates, the investment corpus with the life insurance companies is around Rs 13 lakh crore. Of this, only 20 percent currently goes towards the infrastructure sector.
As per the current Insurance Regulatory Development Authority (IRDA) norms, insurance companies can invest only in highest rated 'AAA' or 'AA' credit-rated debt paper.
Life insurance companies are allowed to invest up to 50 percent in government securities, 15 percent in infrastructure bonds and 35 percent in other investment grade corporate bonds and equities.
"There is a need to revisit investment norms for insurance companies. Will look at revising investment regulations over the next month," IRDA Chairman J Harinarayan said after the meeting.
The regulator is at present mulling options to allow sector companies to invest more in non-AAA rated securities, including 'A+' and 'A' papers of corporates.
Last year, the Department of Industrial Policy had favoured allowing life insurance companies to invest in greater quantity in non-AAA rated debt instruments to encourage flow of funds to infrastructure projects.
India needs about a trillion dollar investment in the infra space during the 12th Five-Year Plan (2012-17).