Bob Preparing Insurance Arm Blueprint

Bank of Baroda (BoB) is pondering entry into insurance through a subsidiary and is preparing an internal working paper to assess the move's benefit to the bank.

At present, BoB is estimating the extent of risk that it will be comfortable with and also working out the business impact from the insurance venture.

According to chairman K Kannan, the bank is interested in a 30 per cent subsidiary with a foreign partner with 40 per cent stake.

BoB has in the past has been approached by insurance companies from South Africa, the US and the UK; almost all companies who are pursuing State Bank of India for the same purpose have been talking to BoB as well.

Kannan says that the bank will be shortlisting the companies as soon as the government formalises its policy for the insurance sector in allowing Indian companies to float insurance subsidiary with foreign partners. And the bank is expecting to come up with a comprehensive paper very soon. BoB plans to get into areas like life and health insurance but has kept fire insurance out of its list.

According to Kannan, the bank will try to leverage on its solid network in the rural areas especially in Uttar Pradesh, Rajasthan and Gujarat. To start with, BoB will be interested in small policies in the range of Rs 10,000-Rs 20,000 which will mainly be endowment schemes.

Kannan is confident about marketing insurance products to its existing customers but he admits the bank's lack of expertise in assessing uncertainty risk.

"We are in the lending business and not in risk cover activities. So we would be relying on our foreign partner for insurance techniques. We will be drawing from experienced manpower we already have in India in the insurance business," says Kannan.