Portfolio

As NPAs rise steadily, LIC moves to recover bad loans

Radhika Merwin | Updated on January 12, 2018 Published on June 05, 2017

From 4.25 per cent as of June 2016, the insurer’s gross non-performing assets rose to 4.6 per cent as of September 2016 and further to 5.2 per cent in the December quarter

Bad loans have been a menace to banks, particularly state-owned ones, for the last couple of years.

Interestingly, for India’s leading life insurer — Life Insurance Corporation (LIC) — too, non-performing assets have been on the rise in recent years.

According to LIC’s 2015-16 annual report, the insurer’s gross non-performing assets (GNPAs) stood at about ₹14,283 crore (3.76 per cent) out of a total debt of ₹3.79 lakh crore as of March 2016.

GNPAs have gone up to about 5.2 per cent of debt as of December 2016. Five years ago, GNPAs for LIC stood at 1.25 per cent (as of March 2012).

Wide divide

The wide divide in asset quality that exists in the case of private and public sector banks also appears to persist among insurance players.

As of December 2016, insurers such as ICICI Prudential Life, Bajaj Allianz Life, Reliance Nippon Life, Tata AIA, Birla Sun Life Insurance and SBI Life had nil gross non-performing assets.

For LIC, the only public sector life insurer, bad loans have been steadily going up through FY17. From 4.25 per cent as of June 2016, the insurer’s GNPA rose to 4.6 per cent as of September 2016 and further to 5.2 per cent in the December 2016 quarter.

LIC’s GNPAs were higher than that of banks such as Karnataka Bank (4.3 per cent of loans), South Indian Bank (3.9 per cent) and City Union Bank (2.9 per cent) as of December 2016.

Aside from its investments in debentures and bonds, LIC has extended loans to the Centre, State governments, banks, financial institutions and companies, among others.

LIC’s over ₹3 lakh crore of debt as of March 2016 was close to Bank of Baroda’s loan book (fifth largest bank by loans).

Just as banks, the insurer also appears to be taking legal recourse to recover its bad loans. According to data published by Credit Information Bureau of (India), of the cases filed by banks and financial institutions with regard to loans above ₹1 crore, LIC had filed 30-odd cases against defaulters who owed the insurer about ₹3,340 crore as of December 2016.

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