Vysya May Cut Insurance Jv Pie

Vysya Bank is likely to reduce its holding in the life insurance venture -- ING Vysya Life Insurance Company -- following the ING Group's increase in stake in Vsysa Bank. The bank today has a 49 per cent stake in the life insurance venture, with ING holding 26 per cent and the GMR Group having 25 per cent stake.

The proposed reduction in stake follows the Insurance Regulatory and Development Authority (IRDA) having capped foreign holding at 26 per cent in private insurance companies. In the case of HDFC Standard Life Insurance Company, IRDA set a precedent in that it permitted Standard Life to hold only 18.6 per cent in the life insurance venture in view of the UK-based insurer already having 10 per cent stake in Housing Development Finance Corporation (HDFC).

 

The insurance issue was the biggest impediment for ING to hike its stake in Vysya Bank. ING has a 20 per cent stake in Vysya Bank through its subsidiary Bank Brussels Lambert (BBL). Yet IRDA permitted IRDA to hold the maximum permissable by law (26 per cent) in the life insurance venture as the IRDA Act does not take into account holding in banks.

As ING has now increased its holding in the south based bank, Vysya Bank sources stated that it is open to reducing its holding in the insurance company so as to bring down ING's indirect holding in the joint venture.

Yvo Metzelaar, CEO of ING Vysya Life Insurance Company, said the decision is subject to regulatory approvals. Said senior officials at ING Vysya Life Insurance said that the decision to reduce stake (either ING's or Vysya's) in the insurance venture will be decided by the headquarters in Netherlands.

ING has two options today: It can bring down its holding in the insurance venture from 26 per cent to two per cent or ING can decide to reduce Vysya Bank's holding of 49 per cent in the joint venture to 26 per cent.

Reduction in stakes directly by ING or indirectly through Vysya Bank, will result in GMR group increasing its holding, as the joint venture does not wish to bring in a new promoter into the venture.