The proposal on GIC's part to diversify into banking is in tandem with the concept of universal financial sector corporations, where all financial sector players offer the entire gamut of services from insurance to project finance and working capital.

This diversification plan was revealed by GIC chairman D Sengupta during the course of an exclusive interview with The Financial Express recently, when he also discussed a current review of the relationship between GIC and its four wholly-owned subsidiaries, the possible future status of the subsidiaries and GIC's restructuring plans.

The entire exercise has been undertaken in view of the fact that once the IRA Bill is passed-- which is a major possibility -- and private sector players enter the fray, both the GIC and Life Insurance Corporation would be exposed to competition.

According to GIC chief, although the operational feasibility of floating a new private sector bank is under discussion now at the board level, it was too premature to talk about other details like equity. The RBI-stipulated minimum paid-up capital required to promote a new private sector bank today is Rs 100 crore.

Although Sengupta declined to comment on whether some of the existing staff from GIC and its subsidiaries would be trained and deployed in the banking subsidiary in case plans do materialise, the perception doing the rounds is that this may happen, especially since Sengupta has categorically ruled out a voluntary retirement scheme.

Fresh recruitment, especially in non-specialised banking areas, is also not much of a possibility, since the total staff strength of the five companies taken together is currently 86,000.

As far as the branchnetwork is concerned, GIC would have to start from scratch in spite of the insurance major's combined existing network of 4,200 branches, since the RBI does not permit private sector promoters to utilise their existing network for the purpose of their banking operations. If the required approvals do come through, this would be the 10th new private sector bank to launch operations.

Human resource management, which is one of the important components of GIC's restructuring exercise, is being widely perceived as the biggest challenge that GIC will face after the passing of the IRA Bill and the operational opening up of the sector.