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Insurance Regulatory and Development Authority of India (IRDAI) Chairman Subhash Chandra Khuntia, on Friday, said the insurance regulator will soon give a timeline to Life Insurance Corporation of India (LIC) to bring back its shareholding in IDBI Bank to 15 per cent from 51 per cent.
“We will look at LIC’s business plan (post acquisition of 51 per cent stake in IDBI Bank), and then decide on the reduction of its stake in IDBI Bank,” Khuntia told reporters on the sidelines of an Assocham insurance conference. He stressed that the life insurer would have to first safeguard the interests of policyholders.
State-owned LIC currently holds 7.98 per cent in IDBI Bank, but plans to increase it to 51 per cent as part of its strategy to enter the banking space and lower the debt burden of the bank.
IRDAI had, in June this year, relaxed norms for LIC to make the acquisition. The insurer is also in the process of picking up an additional 7 per cent stake in IDBI Bank through preference shares.
The LIC Board had also met onTuesday to finalise the timeframe and mechanism for the acquisition, including the possibility of an open offer.
When asked about the ongoing case in Delhi High Court against the acquisition, filed by the All India IDBI Officers Association, Khuntia said IRDAI has given its response to the court.
“IRDAI has the powers to give relaxations in specific cases, if they are justified. LIC had requested that in the interest of their expansion, they would like to have a synergy with a bank. Some relaxation has been given for this specific case,” he said, adding that there would be no blanket exemption for all insurers.
Insurance penetration
Meanwhile, addressing the conference, Khuntia urged insurers to increase awareness and penetration of insurance in the country. Penetration of insurance in the country is only 3.69 per cent of gross domestic product (GDP) against the global average of 6.2 per cent, the IRDAI Chairman noted, pointing out that there is also low persistency ratio.
He also urged insurers to explore the possibility of long-term insurance products in other segments, apart from motor third-party insurance, which has just been launched.
IRDAI will also put in place a new methodology for quick approval of products. “We are also looking at opportunities to have more use-and-file kind of products,” said Khuntia.
Further, the regulator is working on guidelines for regulatory sandbox for some innovative products that can be tried out in a limited scale and then be introduced as full-fledged products, he said.
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