The Insurance Regulatory and Development Authority (IRDA) has prohibited insurance companies from investing in Indian Depositary Receipts (IDRs). In a circular issued recently, the regulator said: “On examination of the features of IDR, it is observed that an investment in an IDR by any insurer would amount to an indirect investment made outside the country and would not be in compliance with Section 27C of the Insurance Act. The act restricts the investment of policyholders’ fund directly or indirectly outside the country.”

IDRs are instruments that allow foreign companies to mobilise funds from Indian markets by offering their equity shares. These will be listed on the Indian stock exchanges and will be freely transferable.

However, insurance companies do not see this directive as an opportunity missed. “IDRs would have been a good idea if some big names were coming to the Indian markets to raise funds. However, we still have a lot of good names in the industry to invest in. Keeping in mind the amount of corpus private life insurers manage, I think Indian markets are deep enough to absorb the investments,” said Abhijit Gulanikar, chief investment officer, SBI Life.

As on May 31, private insurance companies manage just Rs 3,299.14 crore. The Life Insurance Corporation of India, the biggest player in the space, manages Rs 5,354.92 crore.

On the other hand, capital market regulator Sebi had allowed mutual funds to invest in these instruments last month. However, no foreign company has so far shown interest in coming to the Indian markets to raise money through IDRs.