The Hindu Business Line : IRDA to consider RBI’s views on holding cos

While examining those applicants regulated by the RBI, we take into account the regulatory concerns that it may have in specific structures. — C.S. Rao

C.S. Rao

G. Naga Sridhar

Hyderabad, Dec 19 The proposals of some financial majors with stakes in insurance and banking to go for holding company arrangements may take some more time to materialise as the Insurance Regulatory and Development Authority (IRDA) is preferring to go by the RBI’s views and by its own rule book.

The holding company arrangements need to satisfy the stipulations on registration of insurance companies laid down in the regulations framed by IRDA. “However, while examining those applicants regulated by the Reserve Bank of India, we take into account the regulatory concerns that the RBI may have in specific structures,” Mr C.S. Rao, Chairman, IRDA, told Business Line here.

Further, the insurance regulator will also examine corporate restructuring proposals on a case-to-case basis.

“Of late, there have been instances of Indian corporates taking up restructuring which has been driven by a number of factors including operational convenience and to drive optimum valuation for their respective groups. In some cases, companies have opted for separating their finance and non-finance activities. The Authority takes up each case on its merit,” Mr Rao said.

On the need for a common regulatory platform for holding company arrangements for the players that fall under different regulatory jurisdictions, Mr Rao preferred not to comment, but added: “We have a dialogue mechanism with other regulators such as the RBI. As of now, we have no other way but to follow it.”

On the growth of insurance industry, Mr Rao said the industry is gradually turning more competitive. “As on date, there are seven applications for registration with the Authority at different stages of processing. Interest has been expressed by at least two to three other entities although they have still to make a formal application,” he added.

At the end of 2006-07, there were 32 companies which had been granted registration by IRDA. In the current fiscal year, the registration had been granted to one company to underwrite premium in life, two in non-life and one in health segment.

On the suggestions from various quarters to permit broader capital raising norms including hybrid norms, the Chairman said they were not being examined by the Authority at present. The Insurance Act, 1938 permits insurance companies to raise capital only through the equity route.