Andhra Bank in life insurance partner quest

Public sector Andhra Bank is in the lookout for a partner to start a life insurance venture after talks with Japanese insurance major, The Dai ichi Mutual Life Insurance, failed due to differences over shareholding pattern.

The Bank would not participate in the venture if its shareholding goes below 26 per cent, Andhra Bank's Executive Director Kalyan Mukherjee said.

"If the shareholding goes below 26 per cent then its only an investment and not a venture," Mukherjee said.

The Union Bank of India was roped in after talks with Andhra Bank failed.

Bank of India, Union Bank of India and the Dai-ichi Mutual Life Insurance have already signed an agreement to float a life insurance joint venture in India.

Bank of India would hold majority 51 per cent stake in the venture, Union Bank 23 per cent and Dai-ichi 26 per cent ""the maximum permitted to a foreign partner under Government regulations.

Mukherjee said although there was a minimum gestation period of at least six years for the insurance ventures, but life insurance venture was a better bet over non-life joint venture.

"A life insurance joint venture will help the Bank cross sell products and will benefit the long term growth plans," he said.

Andhra Bank is also open to acquisition opportunities in the Indian Banking industry. "We are in look out for banks although the options are very less. We would prefer a strong mid sized bank for acquisitions."

Andhra Bank had bid for United Western Bank, which was later bagged by IDBI.

The executive director said as a principle the Bank has decided not to increase its credit exposure to real estate sector till March this year following the apprehensions expressed by the RBI over speculations in real estate ventures.

Infrastructure, agriculture, retail and SME sectors would drive the credit growth of the Bank, Mukherjee said.

The Bank had witnessed around 23.6 per cent year-on-year credit growth.

The Bank's retail lending portfolio witnessed 21 per cent growth, while the SME grew by 17.11 per cent, agriculture by 14.6 per cent and housing by 24.26 per cent. Andhra Bank's present capital adequacy rate (CAR) was at 13.7 per cent and the net NPA was 0.10 per cent. The Bank is targetting a total business of Rs 67,350 crore by March 2007.

Andhra Bank, which recently started the representative office at Dubai, plans to set up more such offices in the Middle East following statutory approvals.