New Delhi, May 08 : Life and general insurance companies are planning to seek a clarification from the insurance regulator on its position on bank-led firms. Reserve Bank of India (RBI) has in the past expressed discomfort over banks holding large stakes in insurance companies.
“With a majority of insurance companies having banks as promoters and investors, we want a clarity from Insurance Regulatory and Development Authority of India (IRDAI) on their stand on this issue,” said the chief executive of a large private life insurance firm. Sources said that a few banks have expressed their interest in acquiring stake in insurance companies. However, they are waiting for a nod from the banking regulator on the next course of action.
Till now, IRDAI has not expressed any concerns about banks holding large stakes in insurance companies. They have only stated that banks must seek permission from the banking regulators for stake purchase. Banks who wish to hold 5 percent or more stake in an insurance company have to explicitly seek permission from RBI for this purpose.
In an interview to CNBC-TV18, Axis Bank CEO Amitabh Chaudhry said that a possible deal with Max Life Insurance can only move forward if they have the support of the regulators. He added that RBI has made it clear that they are not in favour of banks holding a large stake in insurance companies.
In the past, RBI expressed concerns about large institutional investors like Life Insurance Corporation of India (LIC) holding a high quantum of stake in banks.
Since both banks and insurance companies are in the financial services sector, lenders use insurers as a channel for growth. On the other hand, insurers with bank promoters find it easier to sell products using the branch networks of the banks.
A host of state-owned banks like Allahabad Bank, Andhra Bank and Indian Overseas Bank are looking to sell their stakes in their insurance ventures. Responding to this, a few private banks have expressed interest in the venture but clarity is being awaited on this matter.
Once IRDAI gives a clarification on this matter, deals that are stuck can be taken forward. Almost 50-55 percent of business for insurance companies comes in from banks and bank-led distribution channels.
