Byapaar.com – The Indian Business Blog

Different people have different needs at various stages of life. So they have to plan accordingly and make some investments for financial security. For long, state owned insurance companies like Life Insurance Corporation of India (LICI) have been offering lots of investment options in India along with traditional saving agencies like banks and post offices. LICI has been the most dominant player in this field with almost monopoly status.

But the scenario has changed since Indian economy started liberalizing and opened up the sector to private and foreign players through IRDA bill in 1999 amidst protest from many quarters. Not surprisingly the who is who of global insurance majors rushed into Indian market and set up shops after tying up with local companies who have little or no experience in insurance business. Soon the market became hot as news players started to market their products more aggressively seldom seen in India. People got spoilt of choice as agents now came to homes or offices with insurance quotes their offered by their respective companies. My intention here is not to write about the history of insurance companies but it is absolutely necessary to know the background for the main topic.

So everything has been going smoothly for all with a booming stock market and fast growing economy. It has been like honeymoon for both investors and insurance companies. But nothing in a market environment is permanent and one fine day in the middle of September this year everything came tumbling down as world financial markets crashed. As most insurance companies invest funds they collect from clients, most of them suffered huge losses due to the global financial problem phenomenon.

To cite a personal example, one of my colleagues invested Rs. 50,000/- with an insurance product offering high returns (thus highly risky) and linked to stock market with life insurance as an added option, (continue reading…)

In the midst of warning by the International Monetary Fund (IMF) of developing economies being toppled in the ongoing financial crisis, guardians of the Indian economy are working overtime to ensure India did not suffer much due to the global phenomenon. There is already signs from everywhere about an imminent slowdown of economies all over the world including the USA which reported a contraction of .1 percent of its economy last week.

It is really heartening to see that the Government of India is doing its best and working with leaders of the industry to see off the crisis. Last week the Prime Minister of India, Dr. Manmohan Singh held a meeting with business leaders like Anil Ambani, Sunil Mittal and others to hear their views on tackling the problem. According to the captains of the industry, the government must relax the credit policy without worrying too much about inflation so as to pump in money in the cash strapped financial sector. They opined that there is already signs of slowdown and if liquidity crunch is not addressed immediately, the economy would suffer more. They urged the government to lower interest rates and release more cash in the market to shore up the already nervous financial sector and thus bring the much needed confidence back in the market.

It seems it is lucky last few weeks in the office for the Manmohan Singh led NDA government as inflation dipped below 11 percent last week for the first time for 5 months and as a result the Reserve Bank of India announced a cut in CRR (Cash Reserve Ration) rate by one percentage point to 5.5 and REPO rate by 50 point basis to 7.5. This will release Rs. 700 billion in the market. Both the government and industry hope that the latest action is a step in the positive direction and it will boos liquidity in the system, stimulate growth and stabilize the financial market. The governor of RBI while announcing the news hoped that the credit requirements would be met through this action and effect the industry positively by picking up growth momentum.

But as always, while welcoming the move, industry leaders hoped the government and the Apex Bank would take more measures to tide over the global financial crisis.  They are asking more reforms in sectors including government debt market to tap new class of buyers and thus bring in more money in the market.

The stock market has responded positively to all these steps as it has been gaining continuously for last 4 trading days. The BSE Sensex has gained a credible 293.44 points today and have crossed the psychological barrier of 10,000 for the first time after it sank few weeks back.