Government demotes LIC Chairman Vijayan to MD

MUMBAI: TS Vijayan, the chairman of Life Insurance Corporation of India , has been demoted to the position of managing director following a cash-for loans scam which engulfed the corporation's investment department in November last year.

This is for the first time that any Chairman of LIC has been asked to work as a managing director. Rakesh Singh, an additional secretary in the financial services department of the finance ministry, has been appointed as the acting chairman.

Vijayan's demotion comes within weeks of the finance ministry setting up a committee led by former deputy governor of the Reserve Bank of India (RBI) Vepa Kamesam to probe the investments made by the LIC in the last three years. The committee is expected to make recommendations on the governance standards and investment guidelines of India's largest financial institutions. The LIC's investment corpus is worth 9 lakh crore.

A LIC source said Vijayan may resign from the corporation following the snub by the finance ministry and he will take a decision soon whether to continue as MD for the next two years or not. Sources say the finance ministry led by Pranab Mukherjee is taking a strict view of the cash-for-loan scam which broke our in LIC last November. The CBI had arrested LIC Housing CEO RR Nair for approving loans after taking bribes.

Apart from Nair, those arrested were Naresh K Chopra, Secretary (Investment), LIC, R N Tayal, General Manager of Bank of India (Delhi), Maninder Singh Johar, Director (Chartered Accountant) of Central Bank of India , Venkoba Gujjal and Dy General Manager of Punjab National Bank (Delhi). Rajesh Sharma, CMD of Mumbai-based firm Money Matters Ltd and two of its employees -- Suresh Gattani and Sanjay Sharma-- were among those arrested.

The CBI had alleged that bank officials colluded with the firm to sanction large scale corporate loans, overriding mandatory conditions for such approvals along with other irregularities.

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