The Investing Institutions

Life Insurance Corporation of India (LIC):

The LIC is the largest institutional investor in this country. The investments of LIC are regulated by Section 27-A of the Insurance Act, 1938. Consequently, a much larger portion of its investible resources are invested in Government and other approved securities and is given as loans to socially-oriented sectors. However, the LIC provides assistance to the corporate sector in the following ways:

i) By subscribing to the bonds and shares issued by the Development Banks like IDBI, IFCI, ICICI, SFCs.
ii) By directly subscribing to, or underwriting the shares, bonds and debentures of the corporate sector. It also purchases corporate securities in the market.
iii) By providing term loans to companies, singly or in participation with banks.

General Insurance Corporation of India (GIC):

According to the guidelines issued by the Government, till April 1, 1995, 70% of the accretions to the fund of GIC were required to be invested in the socially oriented sectors, which include Central and State Government securities and loans to various public bodies engaged in housing. Now this percentage has been reduced to 45 per cent. Out if the balance, the GIC invests in corporate sector by way of underwriting of new issues of companies and also by way of term loans/subscriptions to privately placed debentures.

Unit Trust of India (UTI):

The UTI is a statutory public sector investment institution set up in 1964. It mobilizes the savings of the community through the sale of its units under its various unit schemes. The resources thus mobilized are invested by the UTI mainly in the shares and debentures of the companies. Income received from these investments, after meeting the expenses of the Trust, is distributed to the unit holders annually as divided.

The UTI provides to investors, specially the small ones, opportunities for gainful employment of their savings. By buying units, they can share in the growing industrial prosperity of the country, diversify their risks, and at the same time, derive the benefit of professional management of their funds. The Unit Trust is always ready to buy back the unit from the holders at prices determined by it. It has distributed dividends at constantly rising rates. The dividend declared by the UTI is exempt from income-tax under section 80L of Income tax Act to certain limits.

The UTI has introduced a number of unit Schemes so far, viz., the Unit Scheme, 1964, the Unit Linked Insurance Plan, 1971, Unit Scheme for Charitable and Religious Trusts and Registered Societies, 1981, the Income Unit Scheme, 1982, Monthly Income Unit Scheme, 1983 and Growth and income Unit Scheme, 1983.

In September 1986, the Unit Trust of India introduced a new Mutual Fund Unit Scheme wherein Mater Shares of Rs 10 each have been issued at par. The salient features of this scheme are:

i) The master shares are listed on all the stock exchanges and thus provide liquidity to the investors.
ii) The mutual fund has invested primarily in equity shares. It may also invest in money market Instruments such as call deposits with and bills discounted by banks, short term borrowings by companies and variable rate debentures.
iii) Master shares are freely transferable.

Export Import Bank of India (Exim Bank):

Set up on January 1, 1982, the Export Import Bank of India is the apex banking institution in the field of financing foreign trade of India. The Exim Bank provides financial assistance to exporters and importers and functions as the principal financial institution for coordinating the working of other institutions engaged in financing of exports and imports of goods and services. It provides refinance facilities also to the commercial institutions against their export-import financing activities. Broadly, the functions of Exim Bank included:

i) Financing of exports from and imports into not only India, but also third countries, of goods and services.
ii) Financing of joint ventures in foreign countries;
iii) Financing of export and import of machinery and equipment on lease basis;
iv) Providing loans to an Indian party so as to enable it to contribute in the share capital of a joint venture in a foreign country.