PSBs merger impact: IRDAI extends duration of existing bank-insurance partnerships by a year
Insurance regulator IRDAI has allowed Punjab National Bank, Canara Bank, Indian Bank and Union Bank, who have acquired other banks as part of the public sector bank (PSB) merger process, to continue the existing bancassurance (banks selling insurance) agreements for the next 12 months.
Insurance Regulatory and Development Authority of India (IRDAI) has said that even if the number of bancassurance tie-ups exceed three each in life, non-life and standalone health category, banks can continue with the partnerships for one more year.
Current insurance laws prohibit banks from tying up with more than three insurers in each category (life, non-life and health) to sell policies.
As part of the merger, Oriental Bank of Commerce and United Bank will be merged into Punjab National Bank while
Two banks coming from south – Canara Bank and Syndicate Bank – will be merged.
Andhra Bank and Corporation Bank will be merged into Union Bank. The fourth one will be the consolidation of Indian Bank with Allahabad Bank.
Since the bank merged into larger banks sell insurance products, these partnerships will automatically pass on to the acquirer bank.
Further, the acquirer banks (Punjab National Bank, Canara Bank, Union Bank and Indian Bank) will also receive renewal commissions for the insurance products sold. This is subject to these banks entering into servicing partnerships with the insurance companies.
It is likely that a similar flexibility could be given for banks holding promoter stake in insurance companies.
Clarity is awaited on what happens to banks where there is an insurance joint venture. After the PSB merger, Union Bank will be tagged as promoter of both Star Union Dai-ichi Life Insurance as well as IndiaFirst Life (where Andhra Bank is a promoter). Similarly, Punjab National Bank will be tagged as promoter of both PNB MetLife Insurance and Canara HSBC OBC Life Insurance (where Oriental Bank of Commerce holds stake).
As per insurance laws, one bank cannot hold promoter-level stake (more than 10 percent) in multiple insurers in the same category, be it life, non-life or health.
Time to show-off your poker skills and win Rs.25 lakhs with no investment. Register Now!