IRDA allows insurers to invest in banks' new instruments

India Infoline News Service | Mumbai |

This includes debt capital instruments, redeemable non-cumulative preference shares and redeemable cumulative preference shares under Tier-II capital

The Insurance Regulatory and Development Authority (IRDA) has allowed insurance companies to invest in new instruments issued by domestic banks.
This includes debt capital instruments, redeemable non-cumulative preference shares and redeemable cumulative preference shares under Tier-II capital.
In its November 2008 circular, IRDA allowed investment in perpetual debt instruments of bank’s Tier-I capital and debt capital instruments of upper tier-II capital. With the migration of banks to Basel III capital adequacy norms, there is a substantial need for raising additional capital by banks. Globally, banks have started augmenting capital by issuance of Common Equity Tier I (CET-I), Additional Tier-I(AT-I) and Tier II (T-II) instruments. RBI has issued detailed guidelines on 2 May 2012 regarding implementation of Basel III capital Regulations in India, IRDA said in a notification on Thursday.
IRDA had examined the various instruments prescribed under Basel III framework and have decided to permit following new instruments issued by Domestic Banks for Investment by Insurers.
Tier II (T-II) capital includes Debt Capital Instruments, Redeemable Non-cumulative Preference Shares and Redeemable Cumulative Preference Shares.
The Debt Instrument issued by Banks shall be rated not less than ‘AA’ by an independent, reputed and recognised Rating Agency, registered under SEBI. If the Instruments are downgraded below AA, such investments shall be re-classified as ‘Other Investments'. In case the Interest on the Instrument is not serviced on due dates, the Investment in such instruments are to be re-classified as ‘Other Investments’ from such date for reporting to the Authority, IRDA added.
 

Advertisements

  • Save upto Rs.2.67 lakh with Pradhan Mantri Awas Yojana ...Know more
  • Now Save Rs.3150 on your Demat Account ...Click here
  • Now get IIFL Personal Loan in just 8* hours...APPLY NOW!
  • Get the most detailed result analysis on the web - Real Fast!
  • Actionable & Award-Winning Research on 500 Listed Indian Companies.