32. Earlier I made a reference to insurance in the context of long-term finances. LIC and GIC are our two premier institutions in the insurance sector. I intend to strengthen them. The strength of an insurer has to be measured by the range and quality of its services and products and by the number of people availing of those services and products. I am happy to announce that I have been able to persuade LIC and GIC to offer two new services aimed at the middle class and the poor.
33. LIC will offer a new pension scheme called "Jeevan Suraksha". The details of the new scheme will be announced separately but an illustration of how the scheme will work can be given. A person who subscribes to the scheme at age 30 for a period of 30 years by paying just Rs.250 per month will get a life pension of Rs.3,500 per month beginning at age 60. In addition, that person will get 25% of the commuted value of the pension - about Rs.1 lakh - immediately on retirement. If the insured person dies before retirement, the spouse will be paid a substantial life-long pension. This scheme will meet a long-felt need amongst a large number of people for economic security beyond their working life. To launch this personal-cum-family pension scheme, I am proposing some fiscal incentives which I shall outline later.
34. Medical insurance is an area where the quality of the product can be greatly improved. Under the existing Medicare scheme, the maximum cover available is Rs.83,000 which is further segmented into different components. This ceiling is being enhanced to Rs.3 lakh with a single aggregate limit.
35. Furthermore, the GIC will launch a new low price medicare policy appropriate to the vast majority of our people. Jeevan is the brand name for the LIC and we respect intellectual property rights. So we are calling this new scheme "Jan Arogya". The policy will provide a cover upto Rs.5,000 per year with an annual premium of only Rs.70. What is more, a family of four comprising the husband, wife and two children below the age of 25, can pay an annual premium of Rs.240 and get cover for Rs.20,000 for the family as a whole. GIC will soon announce the details of this scheme.
36. I have advised LIC and GIC to introduce modern information technology in their business. I have also asked LIC to review the premium structure based on the latest mortality tables.
37. An interim, non-statutory Insurance Regulatory Authority was set up in January 1996. I now propose to introduce a Bill to make it a statutory body and to empower it suitably. When I return to the subject of insurance in the next Budget, I shall address some of the policy parameters outlined in the Common Minimum Programme, including the sequence of steps for the restructuring of the insurance industry.
38. Reform of the banking sector has been an integral part of the process of economic reforms. The public sector banks have shown an improvement in profitability and capital adequacy and are taking steps to adopt improved technology. The entry of private sector banks has added a welcome measure of competition. Hon'ble Members are aware that in the past three years the government provided a total of Rs.11,840 crore to recapitalise several public sector banks. I am happy to inform the House that three of these banks are now in a position to return part of the capital, amounting to Rs.747 crore, reflecting an improvement in their performance. This re-flow of resources will help to recapitalise some more public sector banks for which a provision of Rs.909 crore is being made in 1996-97. Some of the strong public sector banks are also planning to recapitalise themselves by accessing the capital markets directly. Hon'ble Members will be pleased to know that the State Bank of India is today a prized scrip in the market. I am also providing Rs.200 crore in 1996-97 for restructuring and recapitalising the Regional Rural Banks.
39. The capital market has a crucial role to play in raising funds for new investment. Government will ensure healthy development of the capital markets through effective regulation, greater transparency and improved trading and settlement practices. Our major stock exchanges have already introduced on line electronic trading. The commencement of a Central Depository, which is expected in the course of this year, will be a historic further step in the modernisation of the capital markets.
40. The present regulations governing foreign institutional investors allow investment only in listed securities. There is also a limit of not more than 5% for an individual FII and an aggregate of 24% for all FIIs in the stock of a listed company. It has been represented that these limits should be liberalised. Besides, FIIs are unable to invest in infrastructure because most infrastructure projects are set up by new companies which are not expected to be listed for some time. Having regard to these representations, I propose to raise the limit of 5% for an individual FII to 10% subject, however, to the aggregate limit of 24% for all FIIs. I also propose to allow them to invest in unlisted companies in the same manner as they are allowed to invest in listed companies. The revised guidelines are being issued separately by SEBI.
