The Hindu Business Line : Vijaya Bank insurance venture hits IRDA hurdle

Chennai March 12 Vijaya Bank might decide to exit PNB Principal Insurance Advisory Co Pvt Ltd — a joint venture of The Principal Financial group of the US, Punjab National Bank and Vijaya Bank.

The move follows objections raised by Insurance Regulatory and Development Authority over Vijaya Bank using its staff to sell insurance products on behalf of the broking firm. The bank has a 19 per cent stake in the joint venture.

When asked about the development, Vijaya Bank's Executive Director, Mr T. Valliappan, confirmed IRDA's objections and said that the bank's management was considering setting up a separate broking firm if it could be structured to meet IRDA's requirements. He, however, noted that a decision on this was a while away.

It may be recalled that Vijaya Bank had a corporate agent licence for selling the products of National Insurance Company. In 2005, IRDA objected to the bank's `dual presence' — as a corporate agent for one company and a partner in an insurance broking firm — after which the bank surrendered its agent licence.

Speaking to Business Line on the bank's new projects , Mr Valliappan said it has linked up 60 of its 400-odd rural branches through VSATs. The bank is in the process of linking up all the other rural branches.

Rural branches, long seen as a drain on resources, could throw up a surprise. A month ago, Vijaya Bank opened a branch and an ATM in remote Kothamangalam, with a population of about 40,000. It received Rs 3.10 crore of deposits — almost all in the low-cost, savings bank variety.

Mr Valliappan says that inclusive banking can be made possible by strengthening rural branches. Vijaya Bank intends to set up about 15 ATMs at its rural branches. It also plans to open more branches under the regional rural bank floated by it — Visweswaraya Grammena Bank, Mandya. The bank has 23 branches and plans to add seven more.

More branches, ATMs

Mr Valliappan, who is in Chennai in connection with a branch managers' conference, told Business Line that Vijaya Bank would open 50 more branches shortly. At present, the bank has 951 branches. He expects to reach the milestone of 1,000 branches before the year-end.

The bank also intends to put up 100 more ATMs, to take the number of its owned ATMs to 250. Mr Valliappan said that the bank was in talks with UTI Bank as well as the networks of Cashtree and MITR for sharing ATMs. Soon Vijaya Bank's customers would have access to over 8,000 ATMs across the country, he said.

Meanwhile, the bank's board of directors has approved a proposal to hire two experts at the `General Manager' level. One of them will be for handling the bank's treasury operations and the other for technology.

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