PNB seeks IRDAI forbearance for paring stake in Canara HSBC OBC Life

State-owned Punjab National Bank is seeking IRDAI forbearance on cutting down stake in Canara HSBC OBC Life Insurance, which will come to the lender's fold after its merger with Oriental Bank of Commerce (OBC), sources said.

OBC currently holds 23 per cent stake in Canara HSBC OBC Life Insurance. Besides, another public sector lender Canara Bank has 51 per cent stake and HSBC Insurance (Asia Pacific) Holdings Limited as foreign partner owns 26 per cent.

As per the extant guidelines, one promoter cannot hold more than 10 per cent stake in two insurance ventures, sources said.

After the merger of OBC, expected in April, PNB will automatically get 23 per cent stake in Canara HSBC OBC Life Insurance also.

Already, PNB is a promoter of PNB Metlife Insurance with highest stake of 30 per cent.

Founded in 2001, PNB Metlife's other shareholders include US-based Metlife with 26 per cent, Elpro (21 per cent) and M Pallonji & Company (18 per cent).

The sources said PNB has requested the regulator to provide additional time for cutting down or offloading its stake in the life insurance firm that will come to its fold by merger of another lender.

In another case, the merger proposal involving Union Bank of India, Andhra Bank and Corporation Bank, Andhra Bank holds 30 per cent stake in IndiaFirst Life Insurance whereas Union Bank holds 23 per cent stake in Star Union Dai-ichi Life Insurance.

In this case again the merged entity led-by Union Bank of India will have more than 10 per cent stake in two life insurance companies.

In the biggest consolidation exercise in the banking space, the government in August 2019 had announced four major mergers of public sector banks, bringing down their total number to 12 from 27 in 2017, a move aimed at making state-owned lenders global sized banks.

United Bank of India and Oriental Bank of Commerce will be merged with Punjab National Bank; Syndicate Bank will be merged with Canara Bank; Allahabad Bank will be amalgamated with Indian Bank; and Andhra Bank and Corporation Bank will be consolidated with Union Bank of India.

Keeping proposed merger in mind, Insurance Regulatory and Development Authority of India (IRDAI) last month said group health insurance policies of customers of the public sector banks slated to be merged with other PSBs will continue to be serviced by insurer companies till the end of the policy period.

"Upon merger of these PSBs, the underlying group health insurance policies of the customers of the merged banks shall continue to be serviced by the respective insurance companies which issued the policies till the end of the policy period," the insurance regulator had said in a circular.

The insurance companies will make suitable arrangements with the acquiring banks in this regard, it added.

IRDAI said the guidelines have been issued in order to protect the interests of the group insurance policyholders of the merged banks.