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| PNB revives life insurance plans |
| Manojit Saha / Mumbai Sep 28, 2009, 00:21 IST |
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Punjab National Bank (PNB), the country’s third largest lender, is resurrecting its insurance plans.
UK-based Principal Financial and Vijaya Bank, which were PNB’s partners for Principal PNB Advisory, have agreed to sell their stakes in the venture, paving the way for the public sector player’s entry into the life insurance underwriting business. Principal had a 26 per cent stake, while Vijaya Bank held 19 per cent stake. Apart from PNB (30 per cent), Berger Paints held the remaining 25 per cent in the venture.
Due to an exclusivity clause, PNB could only re-enter in the life insurance business after buying out the partners. The clause restricted PNB from undertaking any kind of life insurance activity, either underwriting or distribution.
While most large banks, including some foreign players, have ventured into the insurance business, PNB was one of the big names missing from the sector.
“We plan to enter the life insurance sector with a foreign partner, which is only possible after we buy out other partners’ stakes,” a senior PNB executive told Business Standard.
“Principal has agreed to sell its stake, while Vijaya Bank is also keen to exit the venture. We hope to complete the process of buying stakes by the end of the current financial year,” said a bank executive.
PNB would have to shell out Rs 15-20 crore only for buying the stakes of the existing partners.
Government-owned banks are not allowed to acquire more than 51 per cent stake in an insurance company. Further, since foreign investment in the insurance sector is capped at 26 per cent, PNB would have to look for a third partner to pick up the residual stake, the sources said. Vijaya Bank has served a notice to the other partners about its intention to exit but “at a right price”, an executive at the Bangalore-based bank said.
PNB has signed a bancassurance tie-up with Life Insurance Corporation (LIC) of India in April. If PNB forays into the life insurance sector, it has to terminate its existing relationship with LIC.
Vijaya Bank, which will also exit the venture, has already started discussion with life insurance players for bancassurance tie-ups. The bank has shortlisted few companies for the tie-up.
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