The Insurance coverage Regulatory and Improvement Authority of India (Irdai) has allowed the lately merged Punjab Nationwide Bank (PNB) to carry promoter stake in two life insurance coverage firms – PNB Metlife and Canara HSBC OBC Life Insurance coverage.
After the merger of Oriental Bank of Commerce and United Bank of India with PNB on April 1, the Delhi-based lender holds 30 per cent stake in PNB MetLife and 23 per cent in Canara HSBC OBC Life Insurance coverage.
The insurance coverage regulator has allowed PNB to maintain its shareholding in each the insurance coverage firms intact for now. It has directed the bank to have board illustration in one of many life insurance coverage firms to make sure there isn’t a battle of curiosity.
Banking sources say PNB is prone to have board illustration in PNB MetLife. A choice on this will likely be taken this week.
In accordance with insurance coverage rules, a bank can not promote multiple insurance coverage firm. The mergers, nevertheless, have created an issue: Many of those banks are promoters of insurance coverage corporations.
Previous to the merger with PNB, Oriental Bank of Commerce held 23 per cent in Canara HSBC OBC Life Insurance coverage.
Equally, Union Bank of India – which has absorbed Andhra Bank and Company Bank – has 25.1 per cent stake in Star Union Dai-ichi Life Insurance coverage, and 30 per cent stake in IndiaFirst Life Insurance coverage.
It’s believed that the regulator has additionally allowed the general public sector lender to carry its promoter stake in each the insurance coverage firms with board illustration in one of many firms.
In accordance with the rules, an entity can both be an investor or a promoter in an insurance coverage agency. If an entity holds greater than 10 per cent stake in an insurance coverage agency, it’s a promoter. If the stake is lower than 10 per cent, it’s an investor.
The insurance coverage regulator had earlier hinted at permitting the merged public sector banks to carry over 10 per cent stake in a number of insurance coverage firms, given they restrict their promoter management to 1 entity and stay an investor in others with no say in administration selections.
“It is not prohibited by regulation. But it is prohibited because there will be conflict of interest. We can take care of this by allowing them not to participate in the decision-making,” Irdai chairman had stated on the sidelines of an Related Chambers of Commerce and Trade of India occasion final yr.
“If they give up seats on the board and do not take part in the decision-making process, they can still hold stake in as many firms as they may want to,” he had stated.