IDBI, Fed Bank, Fortis ink pact for risk foray

Industrial Development Bank of India (IDBI), Federal Bank and the Netherlands-based Fortis Insurance International today signed a memorandum of understanding (MoU) to set up a life insurance company in India. The joint venture will be called IDBI Fortis and will be formally launched in February next year.

IDBI will initially hold 48 per cent stake in the joint venture (JV) and Fortis and Federal Bank 26 per cent each. Foreign direct investment in the insurance sector is currently capped at 26 per cent. The MoU provides for Fortis to increase its stake to 50 per cent plus one share when the FDI regulations permit.

Another Dutch insurer, Aegon, last week, announced plans to foray into the insurance business in India with Ranbaxy group company, Religare Enterprises. IDBI had, in March, announced an in-principle decision to form a JV with Fortis for life insurance foray.

At present, there are 15 domestic life insurance companies including the government-owned Life Insurance Corporation of India.

"This transaction is fully in line with our carefully planned expansion strategy announced last year," Fortis Chief Executive Officer Peer Van Harten said.

Addressing a press conference, Federal Bank Chairman M Venugopalan said all the formalities would be completed by December 2006 and the JV would be operational in a couple of months thereafter. IDBI Fortis will be hedquartered in Mumbai.

IDBI Chairman V P Shetty said the new company would require capital in the range of Rs 730-850 crore in the first seven years of opertions.

He said the new company would train the existing staff of the two banks to engage in selling insurance products and would recruit additional man power for the company in future.