INSURANCE
IRDAI plans to allow 10 PSBs to hold over 10% in insurance firms
Dec-07-2019

With consolidation of 10 state-run banks underway, the insurance regulator IRDAI is planning to allow them to cross the 10 percent ownership caps in more than one insurance firms but limit the management control to only one entity. IRDAI also wants such multiple ownerships only in one segment of the insurance industry--either in life or in general insurance and the extant rules do not allow a bank to promote more than one insurance firm in a same segment. Some of the 10 public sector banks (PSBs) that are merging into 4 are promoters of insurance entities as well.

The move comes after the government had in August announced the second round of bank mergers under which 10 banks will merge to create just 4 large banks. Accordingly, the third largest public sector lender Punjab National Bank will take over Oriental Bank of Commerce and United Bank of India; Syndicate Bank will merge Canara Bank; Andhra Bank and Corporation Bank will be amalgamated with Union Bank; and Indian Bank merging with Allahabad Bank.

IRDAI has clarified that if a bank gives up the board membership of invested insurance companies and abdicate the decision-making process, then it can hold more than 10 percent stake in many of them but operating in the same segment-which is life or general. IRDAI also wants more insurance companies to go public to get better valuation which has been evident from the valuation of the listed insurers like HDFC Life, ICICI Prudential, ICICI Lombard General, and SBI Life. IRDAI had given approval to Reliance General for listing but probably it may not go through now.  

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