Investor of last resort
Investor of last resort: LIC's bailout of IL...
August 4, 2018
Your editorial “Investor of last resort” (August 4) raises some fundamental issues, so far dodged by regulators and policymakers. All along, in India, political leadership has been guiding government to use public funds to achieve certain goals, without much bothering about the safety of funds sourced from borrowings/ deposits or without ensuring proper end-use of resources raised for specific purposes. The LIC-bail-out of PSUs or PSBs, openly asking PSUs and statutory bodies to pay the dividend on GOI’s capital without following normal procedures and forcing statutory bodies and institutions in the financial sector to buy G-Secs using statutory obligations indirectly are all extension of this ‘conventional’ practice.
There is nothing wrong in LIC or for that matter any other statutory body or PSU investing in institutions which are not able to raise funds from the market for any genuine reason, But the professionals who are responsible for running the investing institutions should have the freedom to decide terms and conditions of such investments based on market realities. Similarly, GOI should have the courtesy to allow institutions owned by them to meet other obligations to investors and creditors before paying the dividend to the government.
M G Warrier, Mumbai