In a bid to expand its product portfolio, country’s largest bank State Bank of India (SBI) today signed an agreement with Insurance Australia Group (IAG) to set up a 74:26 joint venture for general insurance business.

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The JV will approach the Insurance Regulatory & Development Authority (Irda) once it receives other approvals, including the one from the Reserve Bank of India. SBI and IAG, which finalised their deal this summer, can start selling the products only from next year.

The general insurance venture is the latest in a series of tie-ups by SBI, which is already into the life insurance business through SBI Life, a 74:26 JV with Cardiff. Recently, it received the clearance to forge a JV with Societe Generale for the custodial business. In addition, it is eyeing the private equity space and has also entered the pension fund management business, where it has gone solo for the government pension business.

Currently, there are 14 general insurance companies in India, which includes the four government-owned players accounting for over 60 per cent of the market at the end of March 2008. Following detariffing last year, the general insurance saw a steep reduction in premium rates resulting in a 12.5 per cent growth in premium in 2007-08.

“Insurance penetration in India is very low and the general insurance industry is expected to grow at 15-20 per cent annually over 10 years. This initiative will further diversify SBI’s portfolio of financial services offered to its customers,” SBI chairman O P Bhatt said in a statement.

“Entering the Indian general insurance market has been a priority for IAG for some time, to support our longer term growth and profitability...This provides us with an exciting opportunity to be a key participant in India’s rapidly growing general insurance market, by leveraging the combined strengths of our two organizations,” added IAG Managing Director and Chief Executive Officer Michael Wilkins.

SBI shares closed 3.03 per cent lower at Rs 1,147.30 on the BSE, while the Sensex ended 0.14 per cent lower.

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