Earlier I made a reference to insurance in the
context of long-term finances. LIC and GIC are our two premier
institutions in the insurance sector. I intend to strengthen
them. The strength of an insurer has to be measured by the range
and quality of its services and products and by the number of
people availing of those services and products. I am happy to
announce that I have been able to persuade LIC and GIC to offer
two new services aimed at the middle class and the poor.
LIC will offer a new pension scheme called
"Jeevan Suraksha". The details of the new scheme will be
announced separately but an illustration of how the scheme will
work can be given. A person who subscribes to the scheme at age
30 for a period of 30 years by paying just Rs.250 per month will
get a life pension of Rs.3,500 per month beginning at age 60. In
addition, that person will get 25% of the commuted value of the
pension - about Rs.1 lakh - immediately on retirement. If the
insured person dies before retirement, the spouse will be paid a
substantial life-long pension. This scheme will meet a long-felt
need amongst a large number of people for economic security
beyond their working life. To launch this personal-cum-family
pension scheme, I am proposing some fiscal incentives which I
shall outline later.
Medical insurance is an area where the quality of
the product can be greatly improved. Under the existing Medicare
scheme, the maximum cover available is Rs.83,000 which is further
segmented into different components. This ceiling is being
enhanced to Rs.3 lakh with a single aggregate limit.
Furthermore, the GIC will launch a new low price
medicare policy appropriate to the vast majority of our people.
Jeevan is the brand name for the LIC and we respect intellectual
property rights. So we are calling this new scheme "Jan Arogya".
The policy will provide a cover upto Rs.5,000 per year with an
annual premium of only Rs.70. What is more, a family of four
comprising the husband, wife and two children below the age of
25, can pay an annual premium of Rs.240 and get cover for
Rs.20,000 for the family as a whole. GIC will soon announce the
details of this scheme.
I have advised LIC and GIC to introduce modern
information technology in their business. I have also asked LIC
to review the premium structure based on the latest mortality
An interim, non-statutory Insurance Regulatory
Authority was set up in January 1996. I now propose to introduce
a Bill to make it a statutory body and to empower it suitably.
When I return to the subject of insurance in the next Budget, I
shall address some of the policy parameters outlined in the
Common Minimum Programme, including the sequence of steps for the
restructuring of the insurance industry.
Reform of the banking sector has been an integral
part of the process of economic reforms. The public sector banks
have shown an improvement in profitability and capital adequacy
and are taking steps to adopt improved technology. The entry of
private sector banks has added a welcome measure of competition.
Hon'ble Members are aware that in the past three years the
government provided a total of Rs.11,840 crore to recapitalise
several public sector banks. I am happy to inform the House that
three of these banks are now in a position to return part of the
capital, amounting to Rs.747 crore, reflecting an improvement in
their performance. This re-flow of resources will help to
recapitalise some more public sector banks for which a provision
of Rs.909 crore is being made in 1996-97. Some of the strong
public sector banks are also planning to recapitalise themselves
by accessing the capital markets directly. Hon'ble Members will
be pleased to know that the State Bank of India is today a prized
scrip in the market. I am also providing Rs.200 crore in 1996-97
for restructuring and recapitalising the Regional Rural Banks.
The capital market has a crucial role to play in
raising funds for new investment. Government will ensure healthy
development of the capital markets through effective regulation,
greater transparency and improved trading and settlement
practices. Our major stock exchanges have already introduced on
line electronic trading. The commencement of a Central
Depository, which is expected in the course of this year, will be
a historic further step in the modernisation of the capital
The present regulations governing foreign
institutional investors allow investment only in listed
securities. There is also a limit of not more than 5% for an
individual FII and an aggregate of 24% for all FIIs in the stock
of a listed company. It has been represented that these limits
should be liberalised. Besides, FIIs are unable to invest in
infrastructure because most infrastructure projects are set up by
new companies which are not expected to be listed for some time.
Having regard to these representations, I propose to raise the
limit of 5% for an individual FII to 10% subject, however, to the
aggregate limit of 24% for all FIIs. I also propose to allow
them to invest in unlisted companies in the same manner as they
are allowed to invest in listed companies. The revised guidelines
are being issued separately by SEBI.
Non Banking Finance Institutions
Serious concerns have been expressed from time to
time about the activities of a number of non-banking financial
institutions, both corporate and non-corporate. I am happy to
inform the House that, in consultation with the Reserve Bank of
India, we have decided to bring before this House amendments to
the RBI Act to strengthen the regulatory powers over all kinds of
non-banking financial companies.