http://economictimes.indiatimes.com/articleshow/3418711.cms
The Insurance Regulatory and Development Authority (IRDA) has given permission to insurance companies to invest in mortgage-backed securities (MBS). LIC however, is more comfortable lending directly to housing finance companies (HFCs).
LIC will earn about 11.50% from bank deposits and short-term papers.
If LIC is successful in doing this, it could help banks reduce their prime lending rate (PLR). In addition, the funds lent out will be securitized by the property of customers taking home loans.
LIC has many policies in which policy holders participates in the company’s profit. More importantly, the above mentioned initiative could mean that LIC passes these profits to their customers in the form of bonuses. This will lead to an increased benefit along with the sum insured to policy holders.
November 19th, 2008 at 5:22 pm
Hi!! Please can you explain what is mortgage-backed security?
December 18th, 2008 at 1:14 pm
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December 18th, 2008 at 3:36 pm
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December 18th, 2008 at 4:53 pm
MBS is a derivative whose underline asset is loan …so in case the underline is of good quality there is no problem in investing in MBS….its not a bad product …it was just used badly bu the financial experts ..
December 18th, 2008 at 4:56 pm
Infact MBS and CDO are created to reduce risk by spreading it… these products has become the victims of sub prime crises..