Entry of Banks into Insurance Business: (New rbi guidelines issued on 15/01/2015) on conduct of insurance business by banks have been reviewed. It is advised that banks may undertake insurance business by setting up a subsidiary/joint venture, as well as undertake insurance broking/ insurance agency/either departmentally or through a subsidiary subject to the conditions given in the Annex. However, it may be noted that if a bank or its group entities, including subsidiaries, undertake insurance distribution through either broking or corporate agency mode, the bank/other group entities would not be permitted to undertake insurance distribution activities, ie, only one entity in the group can undertake insurance distribution by either one of the two modes mentioned above. 4. i) Banks setting up a subsidiary/JV for undertaking insurance business with risk participation Banks are not allowed to undertake insurance business with risk participation departmentally and may do so only through a subsidiary/JV set up for the purpose. Banks which satisfy the eligibility criteria (as on March 31 of the previous year) given below may approach Reserve Bank of India to set up a subsidiary/joint venture company for undertaking insurance business with risk participation: a) The net worth of the bank should not be less than Rs.1000 crore; b) The CRAR of the bank should not be less than 10 per cent; c) The level of net non-performing assets should be not more than 3 percent. d) The bank should have made a net profit for the last three continuous years; e) The track record of the performance of the subsidiaries, if any, of the concerned bank should be satisfactory. RBI approval would factor in regulatory and supervisory comfort on various aspects of the bank’s functioning such as corporate governance, risk management, etc. It may be noted that a subsidiary of a bank and another bank will not normally be allowed to contribute to the equity of the insurance company on risk participation basis. It should be also be ensured that risks involved in insurance business do not get transferred to the bank and that the banking business does not get contaminated by any risks which may arise from insurance business. There should be an ‘arms length’ relationship between the bank and the insurance outfit. ii) Banks undertaking insurance broking/corporate agency through a subsidiary/JV Banks require prior approval of RBI for setting up a subsidiary/JV. Accordingly, banks desirous of setting up a subsidiary for undertaking insurance broking/corporate agency and which satisfy the eligibility criteria (as on March 31 of the previous year) given below may approach Reserve Bank of India for approval to set up such subsidiary/JV: a) The net worth of the bank should not be less than Rs.500 crore after investing in the equity of such company; b) The CRAR of the bank should not be less than 10 per cent; c) The level of net non-performing assets should be not more than 3 per cent. d) The bank should have made a net profit for the last three continuous years; e) The track record of the performance of the subsidiaries, if any, of the concerned bank should be satisfactory. As hitherto, RBI approval would also factor in regulatory and supervisory comfort on various aspects of the bank’s functioning such as corporate governance, risk management, etc. 5. Banks undertaking corporate agency functions/broking functions departmentally Banks need not obtain prior approval of the RBI to act as corporate agents on fee basis, without risk participation/undertake insurance broking activities departmentally, subject to IRDA Regulations, and compliance with the conditions given in the Annex. 6. Banks undertaking referral services In terms of IRDA (Sharing of Database for Distribution of Insurance Products) Regulations 2010, no bank is presently eligible to conduct insurance referral business. for more RBI updates visit bankinterview.in 768 people reached
Posted on: Fri, 16 Jan 2015 07:41:58 +0000
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