SBI chairman A K Purwar confirmed that the bank would set up a general insurance venture over the next few months but refused to elaborate on it. Bank sources said SBI's infotech venture, a 50:50 partnership with a domestic IT company, was also ready to take off.
Once the general insurance venture is set up, the SBI will have a complete suite of financial products, in line with those of ICICI Bank and the Housing Development Finance Corporation.
The SBI is yet to identify the joint venture partner for its non-life business. Companies like AXA and Korea's Samsung and Hyundai are reportedly eyeing the over Rs 16,000 crore (Rs 160 billion) non-life insurance market in India.
The bank's foray into the non-life segment makes sense because it has a captive corporate audience -- its clients comprise 80 per cent of the corporate sector.
"We will command a premium from the overseas partner for the venture. In the case of the life insurance venture, too, very little money went out of the bank at the first stage as we got a premium," said a bank source.
So far, the SBI has been distributing products of the New India Assurance Company. Once it sets up its own venture, it will snap its marketing tie-up with New India.
Leveraging its brand name, the SBI is set to become a major competitor in the non-life segment, which has eight private and four state-owned insurance companies.
In non-life insurance, National Insurance Company
The SBI's entry may change the pecking order in the general insurance industry. The churn happened in the life insurance business, too, after SBI Life began using the branches of SBI and its associates to hawk its products. About 4,000 SBI branches now sell life insurance products. The number will go up to 6,000 by next year.
SBI Life is a private company. It is the fourth largest life insurer in the private sector and operates in partnership with France's bancassurance leader Cardif. In the first six months, SBI Life mopped up a premium income of Rs 169 crore (Rs 1.69 billion).
The 74:26 shareholding pattern of SBI Life is expected to be replicated in the proposed general insurance company.
Global players today are not waiting for the foreign direct investment cap to be raised. Rather, they were unable to find good Indian partners having a strong marketing presence, Insurance Regulatory and Development Authority chairman CS Rao told Business Standard earlier.
General moves