Auto Segment
Mutual Fund Segment
My Budget
Expert Speak
In Association With
Business Standard

SBI general insurance JV faces roadblocks

Related News

Rights that IAG will enjoy are an issue the bank’s board is discussing.

State Bank of India’s proposed general insurance venture with the Insurance Australia Group (IAG) is facing hurdles.

O P BhattWhile there is more than one irritant that the bank and the insurer are trying to sort out, sources close to the development said the biggest roadblock is the rights that IAG will enjoy if the proposed venture gets a go-ahead from the SBI board. The issues are likely to be discussed at the board’s meeting on Friday.

According to the terms of the Memorandum of Understanding (MoU) signed in May, SBI will hold 74 per cent in the JV with the remaining being held by IAG. With a 26 per cent stake, IAG will get a veto power in line with the provisions of the Companies Act. The bank’s board had raised a few queries regarding aspects such as moving of special resolutions and capital raising.

A source associated with the deal said the issues are being resolved and the JV is likely to be in place soon so that the company can begin operations in the first half of 2009. In its life insurance venture, SBI Life, India’s largest bank again holds a 74 per cent stake, with the remaining held by Cardiff.

In addition, the fate of IAG is unclear as QBE Insurance, Australia’s largest international general insurance and reinsurance group, has expressed an interest to take over the company. There may be regulatory glitches if the takeover happens in Australia as QBE is associated with Rajan Raheja’s general insurance venture in India. Insurance Regulatory & Development Authority norms do not permit one company to enter into two joint venture agreements in the same business.

The entry premium, which SBI will receive from IAG thanks to its distribution network of over 14,000 branches, including the associate banks, is pegged at Rs 400 crore.

SBI’s foray into general insurance is part of its strategy to have a presence in every segment of the financial sector business. The bank has already strengthened its factoring business through acquisition of Global Trade Finance. It is also pursuing plans of venturing into the private equity arena and is in the process of finalising its custodial services joint venture with Societe Generale.

Read more on:   

Read More

Going out of Citi Suvidha? Keep higher balance

Citi India’s ‘Suvidha’ salary account holders will need to maintain a monthly net relationship value of Rs 1 lakh if their salary is no longer ...

Recommended for you

Quick Links

More news from Finance Rss icon

Govt gives Ranjan Dhawan additional charge of MD of BoB

Dhawan has been entrusted the additional charge for a period of three months

Yes Bank to raise $100 million from IFC for green bond, women-owned SMEs

The $50 mn bonds will provide long-term finance for renewable energy projects

Gold sovereign bonds to carry 1.5-2% interest rate

Scheme to be operationalised through designated banks; tax incentives for holders and exemption from CRR/SLR to banks could be carrot to ...

Back to Top