The Principal Financial Group, Punjab National Bank and Vijaya Bank have signed a memorandum of understanding for foraying into life insurance and mutual funds. The insurance company will also offer pension products.
To start with, PNB will be largest shareholder in the insurance business with 37 per cent stake with Vijaya Bank holding 12 per cent.
Principal will hold 26 per cent stake in the insurance venture while a fourth partner will have 25 per cent holding.
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The fourth partner will divest its holdings in favour of Principal once the government raises the foreign investment cap in insurance from the present level of 26 per cent.
Apollo International was expected to be the fourth partner but, bank sources said, the company is not too keen at the moment. Munjals of the Hero group and DCM have earlier walked out of the venture in the past.
In the mutual fund business, Principal will hold 70 per cent stake while PNB will have the remaining shares.
On Tuesday, Principal announced that it was buying IDBI's 50 per cent stake in IDBI Principal Mutual Fund for $20 million.
The memorandum of understanding with PNB and Vijaya Bank was signed here on Tuesday evening, a press release from the Punjab National Bank said.
The statement said that the insurance company will be able to tap the huge branch network of the two public sector banks.
"I am certain that the partnership will help us offer integrated financial solutions by way of providing banking, life insurance and pension and mutual fund products under one roof. It will help our products reach a wider base of investors and expand presence in non-traditional markets," PNB chairman and managing director SS Kohli said in a statement.
Principal had a troubled relationship with IDBI and the financial institution, which also intended to enter the life insurance business could not enter the sector as the US financial services was not too keen on the proposal.