LIC May Seek Bank Licence (07-Mar-2010)
After the Reserve Bank of India (RBI) allows more players to the sector, Life Insurance Corporation of India (LIC) may apply for a licence to start its banking operations.
The official close to the development said LIC had been keen to run a bank for a long time to manage the large premium collection and claim the settlement work.
This year, LIC is expected to collect more than Rs. 176,000 crore as premium income. Similarly, it settles more than 15 mn claims annually which involves payouts to policyholders. Regular payments for the annuities business also need to be made.
LIC holds stakes in several Indian banks and, based on special clearance from the insurance regulator, it was also allowed to hold 26 % in state-owned Corporation Bank.
LIC was also one of the promoters of Axis Bank and has tried to take control of it in the past. However, its proposals were rejected by the RBI on grounds that the bank had received a licence as a private sector bank whereas LIC was a government-owned entity.
Mr. T S Vijayan, Chairman of LIC said Corporation Bank is a public sector bank and it is a strategic investment. LIC is one of the promoters in Axis Bank. But starting a bank is an entirely different ball-game. LIC is waiting for the guidelines to come and will take a call based on the regulations.
To go further with its banking plans, LIC will need permission from the Insurance Regulatory and Development Authority (IRDA).
LIC is the latest to join the list of companies to evince interest in setting up a bank.
The list includes - Aditya Birla Financial Services, Reliance Capital, Bajaj Finserv Srei, Shriram Transport, Indiabulls and IFCI.
Mr. Pranab Mukherjee, Finance Minister of India had announced in the Budget session that the RBI''s intent to issue fresh bank licences. This will be the first set of licences to be issued since Yes Bank and Kotak Mahindra Bank received permission 8 years ago.
LIC will also need additional capital for its banking operations. Under the law governing it, LIC has a paid-up capital base of Rs 5 crore.
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