Punjab National Bank (PNB) has written to the Insurance Regulatory and Development Authority of India (Irdai), seeking time for shedding stake in an insurance company, after its amalgamation with Oriental Bank of Commerce (OBC) and United Bank of India.
“We do not want to go for a distress sale, as it will impact the valuation of the insurance company. We have written to the Irdai seeking time window for selling stake in one of the two insurance companies,” a senior PNB executive said.
According to Irdai guidelines, a bank cannot hold more than 10 per cent stake in two insurance companies. At present, PNB holds around 30 per cent stake in PNB MetLife India Insurance as a promoter and OBC holds 23 per cent stake in insurance joint venture — Canara HSBC Oriental Bank of Commerce Life Insurance Company. Following the merger, which will come into effect from April 1, 2020, PNB will take over OBC and United Bank. “The plan is to reduce stake in Canara HSBC Oriental Bank of Commerce Life Insurance to below 10 per cent,” the official said.
Similarly, Union Bank, which will take over Andhra Bank and Corporation Bank will also have to reduce stake in one of the two insurance companies as a result of the amalgamation. Union Bank holds around 46 per cent stake in Star Union Dai-ichi Life Insurance and Andhra Bank is a part of IndiaFirst Life Insurance with 30 per cent stake.
“We may look to exit from IndiaFirst Life Insurance by sale to other partners or public sector banks,” a bank executive belonging to one of the three banks said.
At the time of amalgamation of Bank of Baroda (BoB) with Vijaya Bank and Dena Bank, the Irdai had refused allowing BoB to offer more than three insurance products to its customers. During the BoB merger, which came into effect from April 1, customers holding insurance policies of the other two banks were asked to switch to insurance products offered by BoB, the anchor bank. Customers with life insurance products were given a time of six months to switch over to life insurance offered by BoB, while for non-life and general insurance, customers were required to choose BoB products from April 1.