As government officials, bankers and the Reserve Bank of India (RBI) dither over how to resolve the colossal stock of Rs7 trillion worth of bad loans that banks have piled up, it would do well to take a closer look at the books of the largest insurer, Life Insurance Corporation of India (LIC).
Though LIC may not be in the lending business, it sure is a big source of funds for private sector companies because the insurance behemoth picks up debentures and bonds from the corporate bond market, besides holding equity stakes in many firms. It has an investible surplus that could potentially finance the government’s market borrowing for a year.
LIC had a debt portfolio of over Rs3.7 trillion as of March 2016 that includes investments in bonds, debentures as well as loans against policies. The insurer has a loan book amounting to Rs1.04 trillion of which a lion’s share is secured loans against policies.
