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Friday, March 4, 2011

PNB will buy stake or plan tie-up for insurance foray

Punjab National Bank will buy equity stake and enter into a corporate agency tie-up with one of the 10 life insurers it has shortlisted, according to a release issued by the state-run lender.
The firms are Aegon Religare Life, Aviva India, Bharti AXA Life, Birla Sun Life, DLF Pramerica Life, Future Generali Life, HDFC Life, Max New York Life, MetLife and Reliance Life.

According to chairman KR Kamath, PNB, which is keen to buy stakes in life as well as non-life firms, has received applications from 42 insurers. At present, PNB has a referral arrangement with the Life Insurance Corporation of India (LIC) for selling insurance products. It's an arrangement where banks or finance firms receive commissions for selling insurance products.
PNB had earlier joined hands with Vijaya Bank for a life foray but the proposal was later dropped. Another PSU lender, Syndicate Bank , has hired Ernst & Young to help choose a partner.
Public sector banks generally prefer three-way JVs like India First where Bank of Baroda , Andhra Bank and Legal & General UK hold shares.

After recent regulatory changes, insurers are under pressure to bring down distribution cost. As far as banks are concerned, the central bank has certain reluctance in allowing small and mid-sized banks buying significant stakes in insurance firms due to their huge capital requirement.

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