"There are three units — one is investment operations
department, second is the monitoring department and third is the risk management and research department. There's
a big Chinese wall between these departments. There're checks and controls in the systems, and nothing can go
With an asset base of Rs 12 lakh crore, Life Insurance Corporation is, without any doubt, the largest financial institution in the country. in a conversation with GEORGE MATHEW, managing director of LIC THOMAS MATHEW says, “LIC’s investments are reported to and decided by our investment committee, which is a sub-committee of the board of LIC. The investment policy is reviewed by the board of LIC every six months.” Excerpts:
Do you think there're loopholes in the investment practices of LIC?
LIC's investments are totally transparent. Here, no single individual can take any decision and the investments are guided by the Insurance Act 1958, IRDA Regulations, our own standard operating procedure and our own investment policy. These investments are reported to and decided by our investment committee, which is a subcommittee of the board of LIC and meets almost every month. Big investments have to be decided by them unanimously. The investment committee consists of members from the finance ministry and heads of banks and other financial institutions and the investment policy is reviewed by the board of LIC every six months.
Then there are concurrent audit, internal audit, system audit and IRDA inspection. In the corporate loan segment, gross NPA is only 0.90 per cent showing standard assets of 99.10 per cent as per regulatory norms. Our net NPA is only 0.19 per cent —perhaps the best among financial institutions.
There’re enough checks and balances in the system?
Our asset base is around Rs 12 lakh crore. We're investing over Rs 2 lakh crore this year in all the instruments. The systems here are fool-proof and time-tested.
What's the structure of LIC's investment, trading and research functions?
Apart from the guidelines, we have an investment department. There are three units — one is investment operations department, second is the monitoring department and third is the risk management and research department. There's a big Chinese wall between these departments. There're checks and controls in the systems, and nothing can go wrong. If the research department analysts says we can't invest in a particular company or stock, we can't do that. It has to be complied. We can't do otherwise. All the investments are backed by the research department and fundamentals of the company. We invest mostly in Nifty and Junior Nifty companies — large cap companies and very few mid-cap firms.
There's a view that LIC has invested heavily in real estate companies...
Our investment in the real estate sector is only 0.68 per cent of total assets (around Rs 12 lakh crore). We are very careful about investments. We have also set up a high-powered committee to look into all systems to see whether any fine-tuning is required.
Is it true that LIC has invested heavily in QIPs of corporates?
We have a policy not to invest in private sector QIPs. We look at only PSUs provided there's a positive research report and the valuation is correct.
What will be your investment in the capital market this year?
We invested around Rs 60,000 crore in equity last year. This year, depending on the market, it will be around that.