Financial Daily from THE HINDU group of publications
Saturday, Oct 29, 2005
Financial Daily from THE HINDU group of publications Saturday, Oct 29, 2005 |
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Public Sector Banks Money & Banking - General Insurance IOB mulls foray into non-life insurance with Allahabad Bank — May rope in other banks, foreign partner N. Ramakrishnan
Chennai , Oct. 28 INDIAN Overseas Bank is seriously considering getting into non-life insurance business jointly with Allahabad Bank. It hopes to rope in a couple of other banks and a foreign partner into this venture. The bank believes there is a good business opportunity for it considering its asset base and the amount of insurance business it provides to other public sector non-life insurance companies. Mr T.S. Narayanasami, Chairman and Managing Director, IOB, said the bank was looking at this option and would put forward a proposal to its board for consideration. IOB, Allahabad Bank and AllBank Finance, an Allahabad Bank subsidiary, will together hold a 49-per cent stake. A couple of other banks such as J&K Bank, Bank of Rajasthan and Karnataka Bank are also interested in the venture. The promoters will tie up with a foreign partner, and they also hope to rope in one or two Indian companies for stakes in the proposed company. E&Y working on biz model: Mr Narayanasami said Ernst & Young, a management consultancy firm, was working on the business model for the venture. If the venture materialises, it will be the first such non-life insurance company to be floated by public sector banks, Mr Narayanasami said. IOB and Allahabad Bank have decided to cap their stake at 49 per cent to ensure that the proposed company does not have a public sector character and is run by the joint venture partner, with the banks providing the network and infrastructure. Wide presence: Mr Narayanasami said Allahabad Bank had a strong presence in the North while IOB's strength was in the South. On the bank's strategy, he said it would aggressively go in for credit expansion, for which it will require low-cost resources. The bank's low-cost resources - savings and current accounts - contribute to 38 per cent of the total resources against 34 per cent last year. IOB, Mr Narayanasami said, was looking at increasing its fee-based income through distribution of mutual funds and the tie-ups it has in health and life insurance. He will meet some of the bank's customers whose accounts are classified as non-performing assets and who have been issued notices under the securitisation legislation for a negotiated settlement. New categories for IOB branches: Mr Narayanasami said he had set in motion a strategy to classify the bank's branches into three categories — resource centres, profit centres and those for priority sector. Through the branches classified as resource centres, essentially those in residential and semi-residential areas, the bank hopes to attract deposits and savings accounts to build up low-cost funds. These branches will be given stiff targets for resource mobilisation. In the case of branches categorised as profit centres, they will be given stiff credit targets that offer good yields, while the third category of branches will take care of the priority sector. This is meant to provide greater focus for each branch.
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