BoB, Andhra Bank in insurance venture talk

Bank of Baroda (BoB) has initiated discussions with the Hyderabad-based Andhra Bank to form a tripartite venture to foray into life insurance, officials close to the development said.

"BoB has invited Andhra Bank to become the third partner in the former's proposed life insurance joint venture. The board of Andhra Bank has yet to take a call on the proposal," an official said.

BoB has already signed a memorandum of understanding with the UK-based insurer Legal & General for the proposed life insurance company.

BoB will hold 50 per cent stake in the joint venture, while Legal & General will have 26 per cent, the maximum permissible limit for a foreign insurer in India.

"According to the proposal from BoB that came last month, Andhra Bank can hold 24 per cent in the joint venture," an official said.

When contacted, Andhra Bank Chairman and Managing Director K Ramakrishnan said, "I do not want to comment on the issue at this stage." BoB officials were not available for comment. The insurance venture will have an initial capital of about Rs 200 crore.

According to the Reserve Bank of India's guidelines, public sector banks are not allowed to hold more than 51 per cent in an insurance venture.

Owing to this norm, the state-owned banks foraying into the insurance sector have to rope in one more domestic partner to form an insurance venture.

After finalising the third partner, Bank of Baroda will seek approval from the RBI.

Andhra Bank has been planning to enter the life insurance sector for quite some time and was initially in talks with Bank of India.

However, the talks fell through and Bank of India roped in Union Bank of India for its insurance joint venture with Japanese major Dai-Ichi Mutual Life Insurance Co.

A number of state-run banks, including Canara Bank, Oriental Bank of Commerce, IDBI, Bank of India, and Union Bank of India, have formed joint ventures to foray into the life insurance business in India.

At noon today, Bank of Baroda shares were trading at Rs 267.30 on the National Stock Exchange, up 1.34 per cent from the previous close. Andhra Bank shares were trading at Rs 84.45, down 0.12 per cent from Monday.