In fact Life Insurance companies are getting the savings of an individual for longer period therefore, the Govt. has prescribed the norms how the Insurance companies can invest their funds. The norms are as follows:
Every insurer carrying on the business of life-insurance shall invest and at all times keep invested in the following manner:
Benefits to Govt.
The insurance also helps the economic development of the country as Government gets the huge funds at nominal rate of interest for longer period. Moreover, if the people are taking care for themselves about their present and future needs then Government will spend their funds in more productive manner.
Every insurer carrying on the business of life-insurance shall invest and at all times keep invested in the following manner:
- 25% in Govt. securities
- Not less than 50% in Govt. security or approved securities (including(1) above)
- a) Not less than 15% in Infrastructure and Social Sector b) Not exceeding 35% in others capital market Investment in “other than approved Investments” can in no case exceed 15% of the fund
Benefits to Govt.
- Long term funds and debt instruments are available to develop the economy.
- Infrastructure funds are available to create roads, bridges, communication housing etc. It reduces the burden of the Govt.
- Investment in Rural and Social sector reduces the responsibility of the Govt. as a result of which the financial burden of the Govt. reduces.(d) Capital market: If the insurer is investing the fund in the capital market then industry can enhance their production capacity which will have the multiplier effect on the growth of the economy.
The insurance also helps the economic development of the country as Government gets the huge funds at nominal rate of interest for longer period. Moreover, if the people are taking care for themselves about their present and future needs then Government will spend their funds in more productive manner.