LIC divestment for ‘Moneyback’?, panic prevails

The government badly fails to face the fiscal pressures and is just focusing on raising money rather than spending it.

In a hustle to get fiscal gains, the government announced to divest the LIC through an Initial Public Offering (IPO).

This means that now government intends to sell  stakes in the oldest and  largest government finance company to raise cash.

It will also increase deposit insurance to reassure savers in a banking sector that's grappling with the world's worst bad-loan ratio.

The decisions show the limitations PM Modi faces as the economy faces a widening budget deficit.

Loans to Indian companies and consumers are set to grow about 6.5 per cent in the year through March, the slowest pace in 58 years.

The government didn't disclose more details on how it will go about to sell a stake in LIC, hence leaving lakhs of policyholders in panic.

Financial experts have raised issues on  LIC divestment as the insurance behemoth is too large to absorb even the minimum mandatory 10 per cent sale.

People fear that their hard earned money would not be safe with divested LIC. Investors are confused and afraid that the trust factor of LIC will be at stake.

Employee unions of the Life Insurance Corporation of India (LIC) have also opposed the Centre’s plan to sell a part of its stake.

According to the employee unions, the move is “against national interest.”

Reacting strongly to the decision, Congress spokesperson Manish Tewari has said...

.."The Congress would strongly oppose the disinvestment plan through the Initial Public Offer (IPO) route. It is tantamount to selling family jewels in order to fund the budget deficit,”

The Congress leader said the move also raises ‘legitimate suspicion’ about the financial health of the public sector insurance giant....

... as the cash rich LIC has been used to ‘finance’ bail out packages of ailing companies and pick up stakes in loss-making undertakings.