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  • Category: Miscellaneous

    Why Governments are using LIC as a rescuer?

    As a customer of LIC, I have observed that LIC is paying the least to its policy holders. If we see overall returns on its policies, we can say that it is not even paying 5 percent interest annually. But still people believe in LIC because of Government backing. But what LIC is doing? It is increasing its stake in sick PSUs and sick Public Sector Banks to rescue the Government and to achieve its disinvestment targets. The recent example is increasing its stake to 51 percent in the IDBI bank. Sick banks are giving loans to defaulters and our LIC is investing our money into these sick banks. Why Governments are using LIC as a rescuer?
  • #641078
    The answer is simple. LIC has an astronomical amount of unutilized/idle money, the exact amount of which is not known to anybody. So, the Government is trying to bail out sick PSU banks utilizing a very small part of unutilized money. But whether this step is financially prudent or not, only the future can tell. Some banks can utilize this opportunity in an intelligent manner and come out of the mess. But some banks may not. It depends upon the future policy of the bank management.
    Non-violence is the greatest Dharma; So too is all righteous violence.

  • #641105
    See government has every right to plough back the profits of any government corporation or organization for the benefit of the society and there cannot be hindrance to its decision. LIC has been accumulating profits over the years and the underutilized amounts has to be channeled for the great purpose. IDBI has been ailing and a little push from the government would ease out the bank from the problems. Moreover the bank has to return the amount with good interest and that would additional income for the LIC too. So I do not find any issue here if the government thinks of helping out IDBI through LIC.
    K Mohan
    'Idhuvum Kadandhu Pogum "
    Even this challenging situation would ease

  • #641114
    First we. Should know LIC contributions can't be treated as investments. They are for risk coverage. So I think it is not correct to calculate the rate of interest. If you take a term policy there is no return for you.
    LIc is having a lot of reserves and liabilities are less. The money is to be utilised somewhere and see that the money is utilised wisely.so the government is trying to give a chance to the fund needed banks to utilise the funds and come out of their woods. I don'tknow Whether it will be good for LIC but their promises to the public will be definitely fulfilled. The government should do something to see that the sick banks will come back. Anyhow let us wait and see.

    drrao
    always confident

  • #641124
    #641105,
    LIC won't get any interest as it is buying the shares of IDBI. It can get profits only when IDBI declares any dividends or if there is any increase in share value of IDBI.
    #641114,
    Can we call a conventional policy as a risk cover if for an annual premium of Rs 30000, the sum assurance is Rs. 500000? LIC agents won't encourage Term policies because they will get less commission. They somehow manage to convince the customers to take conventional policies only.
    By giving very meagre amount of money to its customers it is plundering their wealth and coming to the rescue of the defaulters.

  • #641167
    Let the money not pile up in one corner unnoticed and unaccounted. By giving it to someone, it becomes useful and accountable. LIC is a huge giant with vast money. Let the money roam around to rescue and help someone. LIC will never become bankrupt by doing this. LIC is like a tree where money grows in many crores.
    No life without Sun

  • #641171
    As everyone is insuring their lives and the policies getting piled up with monthly installments of premiums paid promptly, LIC is exploring possibility to earn from its capital and that is no wrong.
    K Mohan
    'Idhuvum Kadandhu Pogum "
    Even this challenging situation would ease

  • #641185
    This is an interesting question.
    Mr Pranab Mukherji, the former Finance Minister under Congress rule, has sold some portion of ONGC shares held by the Govt, well above the prevailing market price at that time using LIC and pooled money for the Govt.
    How intelligent these people are!!

  • #641202
    LIC has given insurance cover to it's customer through various schemes and if I remember correctly there was a time when people used to get returns in the range of 8 - 9% per annum which is quite impressive seeing the facility of insurance cover also. People were blindly investing in LIC and it became an organisations having plenty of surplus funds.

    Govt has always used LIC whenever there was a need of rescuing an ailing organisation. LIC has a role of controlling even the share market in some delicate occasions.

    Incidently some of the investments of LIC in the share, bond and MF markets have given good returns and LIC is financially benefited by them.

    Even today when FD rates are on a downside, LIC is able to give a return of 5 - 6% to it's customers. Due to it's large number of schemes and special tax benefits, LIC is still one of the top organisations in the country to mop up funds from the public. The pretigious 10 years Pradhan Mantri deposit scheme for senior citizens which is giving an assured return of 8.3% is also being managed by LIC.

    So, yes, LIC is working under the Govt directions and there will be occasions when it will not invest only for the profit making purposes.

    Knowledge is power.


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