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.