ICICI Lombard General Insurance Company has received an "in-principle approval" from the Reserve Bank of India (RBI) on Friday to foray into general insurance services pending final clearance from the Insurance Regulatory and Development Authority (Irda).
ICICI Lombard has already received 'R1' clearance from Irda and was told in February to file an 'R2' application after getting a clearance certificate from the RBI. The RBI clearance is significant in light of the banking regulator having rejected ICICI's application in early March.
The term lending institution's plans to foray into the non-life insurance business was rejected by the central bank since its non-performing assets (NPA) level was higher than the permissible level of five per cent and since the number of subsidiaries floated by it is far too many.
ICICI brought down its NPA level to 5.2 per cent, though still marginally higher than the stipulated norm, and has started the process to cut down the number of subsidiaries to 21 by the end of the quarter.
Industry sources, however, stated that the banking regulator's approval is conditional, and carry a few riders. While the exact nature of these riders could not be ascertained, they are understood to have to do with ICICI bringing down its NPA level further below five per cent and reduce the number of subsidiaries.
When contacted ICICI executive director Kalpana Morparia, however, denied the presence of any riders in obtaining the RBI nod. She said the financial institution had committed to the apex bank that it would bring down the number of arms from the present 31 to 21. "This is currently under process and we should be able to bring it down by September 30," she added.
She further said: "We are making every attempt to bring down the NPA level to below five per cent. This has nothing to do with our insurance application. We would have done it even otherwise."
In the fiscal 2000-01, ICICI managed to bring down its NPAs to a level of 5.2 per cent from the earlier year's figure of 7.6 per cent.
Sources said the delay in getting RBI approval also springed from the fact that ICICI was the only domestic financial institution to have ventured into banking and life insurance and now have plans to enter non-life risks too. The entry into both life and non-life insurance businesses are part of the institution's broader plans to become a universal bank.
"However, the RBI requires sufficient level of comfort as it is more worried about the banking industry, and the amount of risks the financial institution is taking on its books," said a senior official.
ICICI entered into a joint venture agreement with Lombard, one of the oldest property and casualty insurance companies in Canada in early October last year.
The proposed entity will offer both commercial and personal lines of general insurance products to corporate and retail customers. ICICI entered into a joint venture agreement with Lombard, one of the oldest property and casualty insurance companies in Canada in early October last year.
The joint venture is to be headed by Sanjay Kerkar as the managing director and chief executive officer. He was a senior general manager at ICICI.
In the initial years, a large portion of the premium income is expected to come from policies sold to corporates. While the company will also be rolling out personal insurance products, the contribution of this segment to total business is expected to grow only over a period of time.
