Millennium Post

IRDA lets insurers earn extra equity yield via SLB

Giving more freedom to insurers in securities market operations, regulator IRDA has allowed them to lend up to 10 per cent of their equity holding in a particular entity to earn extra yield on the portfolios.

Insurers, according to an Insurance Regulatory and Development Authority (IRDA) circular, can now participate in securities lending and borrowing (SLB) subject to certain conditions.

'Insurers are permitted to lend through SLB framework in equities only ... Insurers can only lend securities to the maximum extent of 10 per cent quantity in the respective scrips in the respective funds,' it said.

Under the SLB scheme, those having securities can lend their securities for consideration and those requiring securities can borrow the same. In securities lending, a legal title of a security is temporarily transfered from the lender to the borrower. The tenure for SLB transactions is up to 12 months. As per the BSE, securities lending is especially attractive for large large institutional holders of securities, as it is an easy way of generating income to offset custody fees, and requires little involvement or time.

Last August, IRDA had issued draft guidelines in this regard for comments and suggestions from various stakeholders including life insurers, general insurers and other entities.

There are over two dozen life and general insurers, besides LIC and four state-owned general insurance companies, in the country.
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