Vijaya to go solo on insurance venture

Bangalore-based Vijaya Bank is likely to firm up its insurance venture by December. The public sector bank, which recently decided to pull out of its joint insurance venture "" PNB Principal Insurance Advisory Company Private with the Punjab National Bank and the Principal Financial Group of the US "" proposes to float an insurance company on its own.

Vijaya Bank Chairman and Managing Director Prakash P Mallya said, "The insurance market in the country is very huge and we want to take complete advantage of the opportunities available. This time we want to do a proper due diligence and take an appropriate decision that is beneficial to our bank."

He said the bank's board would soon decide on whether it should go alone in the insurance business or tie up with another partner. The bank will start off with general insurance and later foray into life insurance, he said.

"There are many companies in talks with us for forming a new joint venture. We have asked them to make a presentation to us. The process will be completed within two months and the board would take a final decision after that," he said.

Mallya said the bank decided to pull out of the JV, in which it had 19 per cent stake, following an objection raised by the Insurance Regulatory and Development Authority (Irda) to the bank's dual presence in the insurance sector. It also had a corporate agency for the distribution of National Insurance Company products.

"I was not happy with the performance of the joint venture. It was not working well and restrictions from Irda that we should not engage our employees to sell insurance policies made us to pull out of the JV. I am looking at a long-term perspective in the insurance business. We are now reworking the whole plan," he said.

According to him, the bank could either form a similar JV or a subsidiary company for its proposed insurance business.

"We are presently in the process of appointing a consultant to study the market and advise on the right way for us. We expect the report to come out within the next two months and in all probability we will announce our new insurance venture by the end of December this year," Mallya said.

The bank is also raising Rs 300 crore upper tier-II capital during the third quarter of the current financial year to fund its expansion plans and shore up the capital adequacy ratio. Its CAR stood at 11.21 per cent as of June 30, 2007.