The National Bank for Agricultural and Rural Development (Nabard) has decided to tie up with an Indian player for marketing life insurance products.
The bank had initially been talking to four foreign insurance players for a tie-up to float an insurance marketing joint venture.
Nabard has been talking to the Life Insurance Corporation of India (LIC) for a possible tie-up, but the decision is awaiting a formal approval from the board, said chairman of Nabard, Y C Nanda. The board is expected to meet in one month to decide on the issue.
"We, being new to the insurance sector, will either have to hire experts in the field or tie up with an existing player with proven track record," Nanda said.
The bank will shortly appoint a consultant to advise the bank on both the possibilities. "Nabard is, however, keen on striking a deal with people who can give us an extensive network in the rural areas," he said.
The chairman had initially stated that the bank will finalise its life insurance business venture with a foreign partner by June 2002. To this effect four foreign insurance companies had made presentation to Nabard.
The initial gameplan was to exchange expertise in respective fields. The foreign firm would provide its expertise of designing life insurance products for rural population and Nabard would trade them with its expertise in handling rural population for micro credit and finance.
The proposed company was to have a minimum of Rs 100 crore capital, with the foreign player holding 26 per cent stake. The equation with Indian partners was yet to be decided.
In life insurance, Nabard's aim would be to try and penetrate the rural market, which, so far, only LIC has been able to reach. The bank has its network of cooperative banks, regional rural banks and other rural organisations to market its products in the rural areas.
It had conducted a market survey for assessing the needs of life and general insurance products among the rural population which currently lacks adequate safety nets.
There was a rural market for insurance products and services, but penetration of the present players was limited mainly because of mismatch between rural needs and the products offered by insurers.
Nanda said Nabard would bridge this gap. The bank would also develop cost-effective and sustainable insurance products for small borrowers resorting to micro-finance.
