The country's largest bank signed a memorandum of understanding in Mumbai recently with IAG for a joint foray. Both SBI and IAG are expected to finalise the shareholders' agreement next month, said Deepak Chawla, deputy managing director, new business, SBI.
SBI will hold a 74 per cent stake in the proposed JV, while IAG would hold the remaining stake, subject to the Reserve Bank of India's approval.
Keeping the business growth in mind, the total capital requirement for five years could be over Rs 300 crore, officials associated with the plans said. The companies will approach regulatory authorities for necessary approvals.
SBI hopes to commence business in the current financial year. The proposed JV has plans to be among the top-three players in the general insurance business in a decade.
The Indian insurance industry is growing at 17 per cent a year and expected to maintain a similar growth pattern for the next three to five years. With SBI's large branch base, the proposed venture's pace of growth is expected to surpass the average industry growth, analysts said.
Commenting on selecting IAG as partner, SBI official said, "IAG's proven capabilities in technical and underwriting expertise, pricing and risk management, and its track record in working successfully with other partners in the Asian region make IAG an ideal partner." SBI had appointed Ernst & Young as adviser for the bank's foray into general insurance.
IAG with operates in Australia, New Zealand, Thailand, Malaysia, China, Singapore and the UK through various brands. Its current businesses underwrite more than Australian $7.5 billion of premium per annum. It employs more than 16,000 people, of which around 11,000 are in Australia.
