After a gap of four years, the Reserve Bank of India is likely to permit public sector banks to set up insurance subsidiaries, provided the new ventures are widely held.
About six new licences are scheduled to be given out to banks. The banks include Bank of Baroda, Punjab National Bank (life insurance) and the State Bank of India (non-life insurance).
The RBI is opposed to a single bank holding a 74 per cent stake in an insurance venture. This is why Bank of Baroda has roped in Oriental Bank of Commerce.
BoB, which had applied for a licence a few years back, expected to get the nod soon, said Anil Khandelwal, the bank's chairman and managing director. BoB plans to hold a majority stake in the subsidiary with an equity base of Rs 200 crore (Rs 2 billion) and is in an advanced stage of talks to rope in a foreign company.
For some years now, the RBI has not been allowing public sector banks to set up insurance subsidiaries.
It allowed only the State Bank of India and private banks like ICICI Bank, ING Vysya Bank and Kotak Mahindra Bank to enter the insurance business.
"The RBI has clearly indicated that it will give fresh licences, provided the new venture is widely held," said an official in a public sector bank. In 2001, RBI allowed the State Bank of India to hold a 74 per cent stake in SBI Life.
Punjab National Bank expects to get a licence soon and State Bank of India is waiting in the wings for a non-life insurance licence.
PNB's venture will be a partnership with the US-based Principal Financial Group, Vijaya Bank and Berger Paints.
It will hold the maximum stake in the company (30 per cent), while the balance will be held by the other three partners. The exact shareholding pattern, however, was yet to finalised, said sources.
The four entities had entered into a memorandum of understanding in April 2004 to roll out an insurance company.
