Lic Offices To House Corp Bank Branches

The Life Insurance Corporation of India (LIC) is planning to house Corporation Bank branches as well as automated teller machines (ATMs) in its offices across the country. The public sector life insurance major had entered into a strategic alliance with Corporation Bank earlier this year to capitalise on the latter's competencies. It holds 27 per cent stake in Corporation Bank.

Going by the arrangement between the two, the Managalore-based listed bank will set up one- to two-man branches in LIC premises. It will also set up 500 off-site ATMs at the LIC branches.

For the bank, the arrangement would mean extra business, analysts say. LIC would gain as premiums deposited into its branches will be credited to the insurer's account on the same day. LIC chairman G N Bajpai said: "It takes two days for the account to be credited once the cheques are paid into the LIC branches. By letting out our premises, customers can get ready facility."

Corporation Bank will benefit through the alliance as it will be able to extend its reach through LIC's 2,048 branches. The public sector bank has a 600-plus branch network, bulk of which is in the south. Further, it will benefit by way of fee-based income, considering that LIC is looking at a cash flow in excess of Rs 76,000 crore during the current fiscal.

On the nature of LIC's growth model, Bajpai said: "I do not want to own any organisation. I only want to get relevant competency, which will give value to shareholders, without much problems."

"The aim is to marshal relevant competency and drive value from each other's crore businesses. In the process, we will capitalise on the free flow of customer to drive down costs, and create customer value," he said.

LIC ruled out floating its own bank or further strategic alliances with other banks, following its alliance with Corporation 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," the LIC chief said.

"Without having to buy an organisation, we can acquire the relevant competency. This is a much faster process compared with setting up of an own bank or acquiring of another entity," he said.

Customer procurement is the key cause for financial institutions' expansion. Most are expanding either by creating new entities or acquiring existing businesses.

LIC, on the other hand, has opted for a third model wherein it proposes to "create long-duration relationships which call for acquiring strategic stake. As per Indian law, it is 26 per cent", said Bajpai.