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LIC open towards setting up of bank: Bajpai

BS Banking Bureau

Life Insurance Corporation of India is still open to the idea of floating a bank on its own despite raising its stake in the Mangalore-based Corporation Bank to 12.81 per cent. "We don't plan to take over the management control of the bank. We are in fact planning to start a bank on our own," chairman G N Bajpai said on Wednesday.

LIC has been in talks with various banking entities --- Indian Bank, IndusInd Bank and HDFC Securities --- for the distribution of its insurance products. It is looking at bancassurance in a big way for the distribution of its products. In the case of the two banks -- IndusInd Bank and Indian Bank -- it was suggested that LIC would provide one key-man at each of their selected branches for the distribution of products. LIC is awaiting the change in the regulations pertaining to corporate agents before taking any final decisions.

LIC chief further said that the life insurer is also looking at possible alliances with insurance companies in order to leverage on the marketing channels and build up capacity for new products.

Even as the deadline for seeking Reserve Bank of India nod for floating a new private sector bank has expired on March 31, Bajpai said for LIC there are no such restrictions (of deadline).

LIC has been active in the secondary equity market this fiscal and its slow increase in shareholding in Corporation Bank was a part of this exercise. "Corporation Bank is a good buy. Our increase in the shareholding is simply a commercial decision, backed by the bank's low NPA (non-performing asset) level, good assets and sound management," said Bajpai.

LIC has about five to 10 per cent holding in most public sector banks. "We do not want to buy an organisation or takeover the management. But we see a good opportunity in Corporation Bank," he said.

LIC has shareholding in every public sector bank as well as many private sector banks. "This is all a part of our portfolio investment", pointed out Bajpai. LIC has since the last fiscal been churning its equity portfolio. According to LIC chief, "this year we have been more active in the stock market and our investment has posted good gains".

So far as LIC's banking arm is concerned, the management will need to go to the board, as well as get government approval. "We are looking at our banking venture seriously, but have yet to take a decision", said Bajpai. Aside from the possibility of starting its own bank, LIC has not ruled out other options including an alliance with or a take over of an existing bank.

"We are looking at how best we can leverage our capabilities to take advantage of the financial services arena, so as to better manage our cash flow, treasury operations, product development and distribution", stated Bajpai.

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