GS Paper - 3 (Economy)

The Union Cabinet on 26 February 2022 permitted up to 20 per cent foreign direct investment (FDI) under automatic route in IPO-bound LIC with an aim to facilitate disinvestment of the country's largest insurer. The decision in this regard was taken by the Cabinet, chaired by the Prime Minister.

What 

  1. The government has approved listing of shares of LIC on the stock market through an IPO by part-sale of its stake in the insurer and raising fresh equity capital.
  2. Foreign investors may be desirous of participating in the mega IPO. However, the existing FDI policy did not prescribe any specific provision for foreign investment in LIC, which is a statutory corporation established under the LIC Act, 1956.
  3. Since as per the present FDI policy, the foreign inflows ceiling for public sector banks is 20 per cent under government approval route, it has been decided to allow foreign investment of up to 20 per cent for LIC and such other corporate bodies.
  4. Increased FDI inflows will supplement domestic capital, technology transfer, skill development for accelerated economic growth and development across sectors.
  5. Setting the stage for the country's biggest-ever public offering, Life Insurance Corporation on 13 February 2022 filed draft papers with capital market regulator Sebi for the sale of 5 per cent stake by the government for an estimated Rs 63,000 crore.
  6. The initial public offering (IPO) of over 31.6 crore shares or 5 per cent government stake is likely to hit D-street in March. Employees and policyholders of the insurance behemoth would get a discount over the floor price.