The Hindu Business Line : No dual presence, IRDA tells Vijaya Bank — Rejects plea on tie-up with National Insurance

THE Insurance Regulatory and Development Authority (IRDA) has turned down Vijaya Bank's appeal to be allowed to continue with its bancassurance tie-up with National Insurance Co Ltd alongside equity participation as a promoter in an insurance broking entity.

Vijaya Bank had made the appeal after the regulator asked it to dismantle its tie-up with National Insurance if it wanted to go ahead with plans to pool in equity to float a broking entity.

"We had written to IRDA to be allowed to continue with our tie-up with National Insurance. But IRDA has reiterated that we would have to end that relationship if we go ahead with the equity partnership in the broking entity," Mr M.S. Kapur, Chairman and Managing Director, Vijaya Bank, told Business Line.

The denial would also stub out similar ambitions being harboured by Punjab National Bank (PNB), which was hoping to ride along with Vijaya Bank if the latter were allowed to maintain its dual presence in the insurance sector.

PNB, one of the partners with Vijaya Bank in the same broking company, has an ongoing bancassurance tie-up with New India Insurance Co.

In its appeal to the IRDA, Vijaya Bank had said that the tie-up with National Insurance was a lucrative avenue to earn fee-based income and that it would be a major blow if it had to suddenly bring it to an end.

"We would lose substantial fee based income. But since the IRDA is firm in its view we are left with no option but to end the relationship," Mr Kapur said.

Mr Kapur also said that PNB too was looking for a similar relief but would now have to initiate separation proceedings with New India.

PNB and Vijaya Bank have entered into a five-way equity tie-up along with the Principal Group, Berger Paints, and Andhra Bank to start the insurance broking outfit.

The new company is expected to start operations soon after obtaining the necessary regulatory approvals.

The IRDA had held that its regulations do not permit a corporate agent to also run a broking entity since it would lead to conflict of interest.

While a corporate agent sells products of single company, a broking outfit is permitted to sell products of all insurance companies.

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