Economics · Primary Markets and Insurance Principles
Which of the following statements regarding primary market mechanisms and insurance principles in the Indian financial system is INCORRECT?
- 1The Insurance Regulatory and Development Authority of India (IRDAI) is responsible for prescribing investment norms that mandate insurers to invest a minimum percentage of funds in government securities and infrastructure.
- 2Initial Public Offerings (IPOs) and Rights Issues are primary market mechanisms where new securities are created for the first time, leading to direct capital formation for the company.
- 3The Principle of Mitigation dictates that the insured party must take all reasonable measures to minimize the extent of a loss even after an insured event has taken place.
- 4Under primary market mechanisms, a Rights Issue is defined as a transaction where securities are sold to a select group of institutional or individual investors without making a public offering.✓
Correct answer
Under primary market mechanisms, a Rights Issue is defined as a transaction where securities are sold to a select group of institutional or individual investors without making a public offering.
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