Life Insurance Corp. of India (LIC) won't be allowed to increase its stake to more than 10 percent in Indian firms, but will be allowed to retain the stake in companies where it already holds more than 10 percent, a finance ministry official said on Tuesday.
Sector regulator Insurance Regulatory and Development Authority (IRDA) does not allow insurers to hold more than 10 percent stake in any firm, leading to market speculations that the state-run insurer might be asked to pare its existing stakes.
"The IRDA has not asked them (LIC) to pare it down. But they may do it for commercial reasons," the official, who declined to be named told Reuters.
"However, they have been asked not to buy more than 10 percent treasury stake in future."
The official also said the insurer's investment in debt and equity is likely to go up to 2.5 trillion rupees ($54 billion) in 2010/11 from about 2 trillion rupees expected in the current fiscal year ending March.