Banks however, will have to give up management control, says Irdai chairman
Insurance Regulatory and Development Authority of India (Irdai) is looking to allow banks to remain promoters of insurance companies. Under consideration is a proposal to allow banks to hold more than 10% in one or more insurance companies if they give up management control. Under existing regulations, one bank cannot be a promoter in a multiple insurance companies in the same segment.
Speaking at the Assocham 12th Global Insurance Summit on Friday, Subhash C Khuntia, chairman of Irdai, said, “Normally we would not allow one bank to hold a promotership with more than one insurance company. But for banks we may allow them to hold more than 10% stake if they give up management control. For instance, if they give up the directorship in the board so that they don’t take part in the decision making then they can still hold the stake.” According to the regulations an entity holding more than 10% is considered as a promoter while one holding below 10% is considered as an investor.
This comes after the government announced merger of public sector banks (PSBs) a few months ago. In August, the government announced merging of 10 PSBs into four banks. But some of the banks which are going to be merged have insurance companies. Finance minister had announced the merger of 10 PSBs-Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and United Bank of India, Canara Bank and Syndicate Bank, Union Bank, Andhra Bank and Corporation Bank, Indian Bank and Allahabad Bank under four separate entities.
Insurance regulator also said that more and more insurance companies should come out and list themselves on exchanges. “We would like insurance companies to be listed. Earlier we had come out with a draft that all companies that have completed 10 years should list. But they are finding it difficult to list because some of them have still not crossed critical size even after 10 years. So we are not forcing them but nudging them to list. They would have seen how the valuations is very good for some of the listed companies,” added Khuntia. In the last few year we have seen listing for life as well as non-life insurance companies on the bourses.
Speaking on the Dewan Housing Finance Limited (DHFL) issue, Khuntia stated that it going to National Company Law Tribunal (NCLT) should not affect insurance companies for the time being, but exposure of insurance companies to the non-convertible debentures (NCDs) would be written-off, following due process.