India’s biggest insurer, the Life Insurance Corporation has committed to invest Rs 1.5 lakh crore in Indian railways over the next five years. The MoU was signed between Financial Commissioner (Railways) Rajalakshmi Ravikumar and LIC Chairman SK Roy and it was witnessed by Union Finance Minister Arun Jaitley and the Minister of Railways Suresh Prabhu.
LIC will invest in bonds issued by various railway entities such as Indian Railways Finance Corporation. There will be a 5 year moratorium in interest and loan repayment. The rate will be linked to 10-year benchmark plus 10 basis points. The bonds will have a tenor of 30 years and will be disbursed over the next five years.
Insurance companies in India are mandated to invest the total premium collected in a fiscal in different sectors. i.e.,
- 50% – Government-approved securities
- 35% – Equities and other instruments
- 15% – Infrastructure.