Why government is selling LIC? and What will happen to LIC after the financial minister’s announce divest?

07/02/2020

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The government set a divestment target of Rs 2.1 lakh crore for FY21 compared with Rs 1.05 lakh crore target for the ongoing financial year. Government had set a target of Rs 1.05 lakh crore in FY20. On the strategic sale, the government has already initiated the process for Air India and invited bids from potential buyers for a 100 per cent stake in the National Carrier.

Government owns 100% stake in LIC and is not likely to sell more than 10% stake in the public sector insurance firm, according to media reports.
Modi government has set an ambitious divestment target of Rs 2.1 lakh crore for FY21 and expects to garner nearly Rs 70,000 crore through partial stake sale in LIC. Experts believe the stake sale will allow government to meet its highest ever disinvestment target and attract foreign investors.
LIC’s gross NPAs rose to 6.10 per cent in the first six months (April-September) of 2019-20. Gross NPAs have almost double in the last five years. The insurer always maintained a stable 1.5-2 per cent gross NPAs.
LIC is the country’s largest insurer with a market share of 76.28% in number of policies and 71% in first-year premiums. LIC has many subsidiaries including IDBI Bank. It bought a controlling stake in IDBI Bank last year. LIC recorded assets under management of Rs 31 lakh crore in 2019.

After divestment, LIC will work as a semi government company like PSU banks. According to media reports, government is selling 10% stakes but can sell more in upcoming days.
Because Main reason LIC’s gross NPAs rose to 6.10 per cent in the first six months (April-September) of 2019-20.

Headquarters: Mumbai
Founded: 1 September 1956
Total assets: Increase₹3,111,847 crore (US$440 billion)(2019)
Chairman: MR Kumar
Managing Directors: Vipin Anand, T. C. Suseel Kumar, Mukesh Kumar Gupta and Raj Kumar
Slogan: LIC’s slogan yogakshemam vahaamyaham is in Sanskrit which loosely translates into English as “Your welfare is our responsibility”.

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