RBI releases guidelines allowing Banks to enterinto the insurance business

• RBI has stated thatthe following conditions must be met by banks in order to qualify for the purpose of running an insurance business with risk participation. They are –
  1. They should be set up only through a subsidiary or a joint venture;
  2. The net worth of the bank should not be less than Rs.1000 crore;
  3. The CRAR(Capital Risk Adequacy Ratio) of the bank should not be less than 10 per cent;
  4. The level of net non-performing assets should not be more than 3 percent;
  5. The bank should have made a net profit for the last three continuous years; and
  6. The track record of the performance of the subsidiaries of the concerned bank should be satisfactory.

• RBI has issued the following conditions to be met by Banks in order to qualify for the purpose of running an insurance agency or broking business in insurance. They are:
  1. Banks may undertake insurance agency or broking business departmentally and/or through subsidiary;
  2. The net worth of the bank should not be less than Rs.500 croreafterinvesting in the equity of such company;
  3. The CRAR(Capital Risk Adequacy Ratio) of the bank should not be less than 10 per cent;
  4. The level of net non-performing assets should be not more than 3 per cent;
  5. The bank should have made a net profit for the last three continuous years; and
  6. The track record of the performance of the subsidiaries, if any, of the concerned bank should be satisfactory.

• Lenders can also act as corporate agents without seeking prior approval from the central bank provided they comply with guidelines of Insurance Regulatory and Development Authority and undertake referral services for multiple companies.

January 15th, 2015