From Insurance To Banking - What are the problems LIC may face?

On TooStep, posting questions and answering the same ar all serious business ... we may not like to see this site as " Answers on Yahoo ".

The author, has initially has made us known that :

---  IRDA has refused permission

--- said Ploicy Holders' money may not be used to form a Subsidiary ( for Banking )

--- LIC is duty bound to distribute profits as "Bonus" to all its Policy Holders after keeping Rs. 5,000 crore as its initial and final Capital ( LIC Act )

................................    Then where do we stand ? Look below may earlier posting in allmost similar subject :

---  Banking and Insurance are two different things. Risk cover for lives require a good capital base. May not banking business erode LIC's capital base ?

---  LIC has no experience in lending and in "Priority Sector Lendings" ( a must ) - they have not seen things like NPA

---  May LIC handle NPA and its management ( LIC agents might be taught what is NPA )

---  In India, (generally) agents are not allowed to handle Banking businesses, no intermediaries allowed, no gift allowed, no commission allowed - even then may LIC use their agents for a otherwise dull business called Banking ?

---  We have seen the fate of AIG - insurance and banking was mixed up

---  May LIC Act permit such new business ?

---  Who will control LIC - RBI or IRDA ? ( our respected FM - only the other day U was advocating 'mergers and amalgamation of Banks in India - have U abandoned such a proposal ? )

As per my view the major problem will :- LIC may face tough competition from foreign & private banks in respect of service. Because mainly in metro cities, PSU banks are already facing huge competition from these banks. LIC has great reputation among Indians especially low income group. So LIC can attract those customers easily but it will face competition to provide extra ordinary services provided by some foreign banks to high net worth clients(HNIs) or even medium income group customers.

But overall we presume that LIC can make a huge client base in all manner & it will also cause for generation of huge competition in banking sector in future

Some of the foreign banks in India still seem to be feeling the ripple effects of the subprime crisis. One of the larger European banks have been in the market for the past several months to hire people in treasury and corporate banking.

However, the bank seems to be finding it difficult to attract talent even from the subprime crisis hit Western banks. The reason: during the height of financial crisis, many banks had cut back on their Indian operations. Seems bankers have a long memory too.

as an insurance company, LIC has become a large white elephant by looting the money of the Policy holders' who could not pay the premium's after the first instalment ! and now as a bank it will loot all the money of the people by declaring itself bankcrupt after five years.

The Power Finance Corporation (PFC) recently raised Rs 550 crore from the bond market. While the issue itself is a modestly sized one, what makes it exceptional is that it had as many as 18 banks acting as managers to the issue — an indication of how the bond markets have tightened.

PFC had set a target of raising Rs 21,000 crore during the current fiscal. So far, its has raised over Rs 16,000 crore. The corporation also plans to raise another $300 million through an external commercial borrowing in the coming weeks.