India's leading financial institution, Industrial Development Bank of India (IDBI) has decided to enter the insurance business following the announcement of the opening up of the sector to the Indian private sector in the Union budget.
"We shall definitely be interested into the insurance business as it is now liberalised by the government," said S H Khan, chairman and managing director of IDBI.
Sources from the FI said IDBI was interested in venturing into the general insurance business as it would ensure synergy in its business activities.
"Providing insurance cover for projects undertaken by big corporate entities would be an area of interest for IDBI as it would fit right into the institution's business profile," said IDBI sources.
The finance minister had said that the insurance sector would be opened to competition from private Indian companies to provide better insurance coverage to our citizens and also to augment the flow of long term resources for financing infrastructure. However, there is uncertainty about the extent of foreign participation.
Describing the definition of Indian companies, finance secretary Montek Singh Ahluwalia while chatting on the Internet yesterday said, "An Indian company clearly means a company registered in India and also controlled by Indian shareholders. Whether foreign equity can be allowed as a minority holding is not known at this moment."
As a business strategy foreign insurance companies can be strategic partners with Indian entities without an equity stake. Once the stand of the government eases a bit the foreign entities can pick up a stake it is felt.
However, sources said that the desire to enter into insurance stemmed much before the finance minister announced opening the sector for domestic Indian companies.
"Prior to the budget, IDBI has already conducted a survey on insurance sector as how they would be best placed in this segment. Besides, several foreign insurance companies such as Japan-based Yashuda had approached IDBI for floating joint venture firm in insurance sector," said a senior IDBI official.
Among the financial institutions, HDFC has already tied up with Standard Life of UK while Industrial Credit and Investment Corporation of India has tied up with Prudential of UK for venturing into life insurance business.
Meanwhile, State Bank of India, which too planned to enter the insurance sector had temporarily shelved off the plans until the sector is opened for private sector.
