Banks For Over 30% Stake In Insurance Jv

Bankers have indicated to the Reserve Bank of India (RBI) that they should be allowed to take more than 30% stake in the insurance subsidiary so taht they could have management control over the venture.

This was discussed yesterday in meeting between bank chiefs and the three deputy governors of the RBI - Y V Reddy, S P Talwar and Jagdish Capoor.

The Reserve Bank of India has indicated that guidelines on valuationof banks ivnestments portfolio would be issued within a week and has asked banks to furnish further comments on non SLR investment within a week to enable them to issue guidelines quickly.

 

On insurance front, both bankers and financial institutions agreed that RBI's guidelines has to strengthen enough to ensure that only sound banks are allowed to diversify in insurance sector, however, they also indicated that NPA level has to fixed a particular level instead of benchmarking it to banking industry which keep fluctuating each year.

Some FIs suggested that as they were not covered under the Banking Regulation Act it might be desirable to permit them to invest in insurance ventures, subject to the IRDA regulations. Bankers felt that as far pure fee-based insurance was concerned banks and FIs should be allowed to undertake it without any restrictions, based on commercial considerations.

Bankers were of the view that RBI should continue to indicate the yield to mautrity for this year and from next year the RBI could explore the possibility of Primary Dealers Association of India could suggesting the YTM. This should be done "without prejudice to the freedom of individual banks contemplated in the draft proposals" said RBI's statement.

On non SLR investment, the method of classification of debentures as an advance or investments for purpose of proision was considered appropriate.

* Bankers say 30 per cent ceiling on banks in JV for insurance not sufficient for management control.

* FIs to be allowed to invest in insurance subject to IRDA as they are not covered in Banking Regulation Act.

* Banks endorsed the proposals of the informal group on valuation of bank's investments portfolio though they want RBI to continue indicating the YTM.

* Banks active in lending money to stock brokers explained safeguards and promised undertaking internal reviews.

* Banks expressed application of caution in financing IPOs.

* Draft proposals for introducing a liquidity adjustment facility were also endorsed by bankers.

* RBi has asked banks to furnish further comments on non-SLR guidelines within a week.