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Wednesday, August 1, 2018

Takeover of IL&FS by LIC looks like a scam

Life Insurance Corporation of India (LIC) seems to have become the saviour of sick entities. After acquiring the bleeding IDBI Bank, it is about to take over Infrastructure Leasing & Financial Services (IL&FS), an unlisted infrastructure body owning dozens of subsidiaries. LIC and its owner, the government, have made a monkey of all rules, norms, and propriety. Worse, nobody is bothered.
The takeover of IL&FS by LIC seems nothing short of a scam.
LIC recently shelled out Rs 13,000 crore to buy 51 per cent stake in IDBI. It was extremely objectionable on the part of the government to allow the insurer it owns to make such a questionable investment. And what, pray, the regulators were doing? They behaved like the lapdogs rather than watchdogs. The Insurance Regulatory & Development Authority of India (IRDAI) okayed the acquisition without much fuss. The banking sector regulator, the Reserve Bank of India, too followed suit.
Then there is something that has been touted as the ‘super-regulator’—the Financial Stability & Development Council (FSDC). Constituted in December 2010, it is chaired by the Finance Minister and its members include, among others, the RBI Governor, Securities & Exchange Board of India (Sebi) Chairman, the IRDAI Chairman, and the Pension Fund Regulatory and Development Authority Chairman.
The FSDC, according to an official website, “deals with issues relating to financial stability, financial sector development, inter-regulatory coordination, financial literacy, financial inclusion and macro-prudential supervision of the economy including the functioning of large financial conglomerates.”
By the way, the FSDC was expanded in May in terms of members; it now also includes the Chairman of the Bankruptcy Board, the Department of Information Technology Secretary, and the Revenue Secretary. But in terms of action? Well, it is missing in action. The acquisition of IDBI Bank by LIC didn’t even makeup to its agenda. In short, the FSDC is becoming bigger—to do nothing.

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