Panel on LIC IPO soon, stake sale not over 10%: Rajiv Kumar

The government will soon set up an inter-ministerial group to look at the listing of Life Insurance Corporation while stake dilution is unlikely to be more than 10%.An inter-ministerial mechanism of department of financial services, Department of Investment and Public Asset Management (DIPAM) and law will work on various parameters of the IPO, said finance secretary Rajiv Kumar in an interaction with mediapersons.Kumar did not confirm the quantum of dilution, but a government official said it is unlikely to be more than 10%.The IPO is likely in the second half of FY21.Kumar said that first LIC has to be evaluated and a number of processes have to be followed, including legislative changes. The finance secretary said sovereign guarantee to the policies will continue. The listing of LIC is an important move as it would bring transparency and enhance disclosures by the entity, Kumar added.ON PENSION REFORMSKumar said amendment to the PFRDA Act to allow it to regulate all pension products is a significant reform in that space. He said the auto-enrollment provision provides that a person gets a pension number allotted as soon as he enters the market, which carries with him for his lifetime. “So, enterprises which were running pension funds of their employees, they get regulated,” he said adding that the amendment bill may be introduced in the budget session. “It's a major welfare because demography-wise you're going to get older, much more populated. Secondly, it's also strategic. The moment your kitty increases over the regulated norm, you also become a strategic investor in many places like Canadian funds,” he said.NO PREMIUM HIKE FOR CONSUMERSOn around Rs 1 lakh deposit, banks give 10 paisa, Kumar pointed. This will increase a little. There is a kind of cross subsidisation by the banks which are very secure to the ones which are not so secure. “Therefore, premiums could go up to 11-12 paisa… there is a limit of 15 paisa in the Act. This is on the bank not on the customer. If you are depositing money with me it is my duty to return it, so it’s on banks,” he said.ON CREDIT DEFAULT SWAPSKumar said the government would introduce a legislation that will allow financial entities to net their liabilities in the current session of Parliament, which is seen as the first step towards credit default swaps (CDS). “Netting is the first phase towards credit default. You cannot have CDS without netting law. CDS is the second stage,” he said.Netting law, he said, will allow them to square off their payment liability. “For example, if I have to take Rs 100 from you, and you have to take Rs 80 from me. It will be square on some particular day, but as of today, I have to take Rs 100, you have to take Rs 80… Total is Rs 180. On the 10% of provisioning, you're blocking Rs 18 capital. You will do two rupees now, Rs 16 are freed up. He said a cabinet note had already been moved by the department of economic affairs. Besides, Kumar said a separate law on CDS will be brought in.PORTAL FOR MSMEKumar said the government is working on a UPI-based platform from April 1, 2020. “We're developing a platform,” he said adding that as soon as an MSME raises an invoice it will be issued a QR code and then it would become discountable. “The invoice is kind of a bill in your hand, which has a value. So, you're creating a value on that invoice by just putting it in your hand. GSTN portal will do that activity,” he said.GOVERNANCE REFORMS IN PSBSKumar said the government had already carried out a number of governance reforms in public sector banks and only some were left. Now, what is left is HR recruitment and training. “This is essentially hiring,” he said adding that the move could aim at flexibility in hiring at the lowest level in PSBs.NEW FRAMEWORK FOR CO-OP BANKSKumar said the government is amending the Banking Regulation Act to place robust regulatory and management norms in cooperative banks. He said these norms could focus on regulatory as well as capital. The government could come out with a separate set of norms specific to cooperatives on permissible lending to a single group.“Cooperative banks play a very important role in the rural areas. But, at the same time, if you are taking deposits, you need to be responsible to the customer also. So those norms will change through the Banking Regulation Act to make it far more robust in terms of regulation,” he said.He said cooperatives would also have to maintain capital as also put in place certain qualification criterion for management. These changes have been prompted by the recent PMC Bank scam in Maharashtra. Kumar said the proposed changes in the law will not touch the powers of regulations of the registrars. There are two-three kinds of registrars, one is the state registrars one the multi-state cooperative business, it's not touching their powers. "Our powers are relating to the entire cooperative structure under the cooperative branch, this is only talking about the banking," he said.MEASURES FOR NBFCSKumar pointed out that NBFCs are not allowed to factor, which restricts the supply of bill discounting and others especially for the sectors. “We are allowing the NBFCs who are not allowed to factor, also to factor,” he said adding that the budget also seeks to make NBFCs enabled in the SARFAESI Act to do the recovery proceedings. He said right now recovery is permitted by NBFCs of Rs 500-crore asset size, which is now being brought down to Rs 100 crore.

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