The insurance regulator has asked government owned banks that are merger candidates to provide a road map on what they propose to do with their stakes in insurance companies after the merger comes into effect.
Banking officials said that a couple of banks will shed their promoter tag in their insurance companies by divesting their stake in the insurers to below 10% to be categorised as an investor, reported Digital FC.
Others have asked the IRDAI for more time to draw up the road map, assuring the regulator that they would be taking a decision keeping policyholders interest in mind, added an official.
Among the banks, a senior official of Andhra Bank told FC that the bank had already started the process of divesting its stake in IndiaFirst Life Insurance to below 10% to be an investor after the bank is merged with Union Bank of India and Corporation Bank. Headquartered in Mumbai, IndiaFirst Life Insurance is promoted by two large public-sector banks—Bank of Baroda and Andhra Bank, which hold 43.30% cent and 29.53% stake respectively in the insurer while the remaining 27.17% is held by Warburg Pincus.
Separately, a senior official of Union Bank of India said the bank would continue to be the promoter of Star Union Daiichi Life Insurance and an investor in IndiaFirst. Union Bank, which will take over Andhra Bank and Corporation Bank, is required to reduce its stake in one of the two insurance companies as a result of the merger. Union Bank holds a stake of around 46% in Star Union Daiichi Life Insurance while Andhra Bank is a promoter in IndiaFirst Life Insurance.
On 30 August, Finance Minister Nirmala Sitharaman announced the merger of 10 government owned banks into four entities.
The other banks are Punjab National Bank (PNB), Oriental Bank (OBC) of Commerce, United Bank, Canara Bank, Syndicate Bank, Indian Bank and Allahabad Bank.
PNB has a 30% stake in PNB Metlife and OBC has 23% in Canara HSBC OBC Life Insurance. Canara Bank has 51% in Canara HSBC OBC Life.
Under existing rules, a bank cannot be a promoter of multiple insurance companies in the same class of business.