After a break of four years, the Reserve Bank of India is set to give the green signal to Punjab National Bank to set up a joint venture insurance subsidiary next month.
PNB will be the second PSU bank to enter the insurance space. The State Bank of India was permitted to do so in 2001. In private sector ICICI Bank and ING Vysya Bank were allowed to enter the insurance turf a few years back.
The Delhi-based bank had submitted a joint application to the Reserve Bank about three months back to set up two subsidiaries, one for insurance and another for pension.
"PNB is likely to get the nod to start the insurance venture in April 2005. The clearance would have come earlier if the application had not been a joint one for insurance and pension," said sources close to the development.
The insurance company will be a partnership between PNB, US-based Principal Financial Group, Vijaya Bank and Berger Paints.
PNB will hold the maximum stake in the company at 30 per cent while the remaining 70 per cent will be held between the other three partners.
The exact shareholding pattern is yet to finalised, said sources. Going by the norms, the foreign partner cannot hold more than 26 per cent stake in any insurance venture.
The four entities had entered into a memorandum of understanding back in April 2004 to roll out an insurance company.
The company to be called PNB Principal Insurance will deal in both life as well as non-life insurance products.
PNB will soon surrender the corporate agency license it currently holds to sell general insurance policies from New India Assurance.
The insurance company will initially cater to PNB's 3.5 crore (35 million) customers and be sold through the 4,500 branches of the bank. PNB also has plans to convert some of its branches in the metros and other major cities into exclusive insurance boutiques.
The hunt for an executive to head the company is on. Principal is looking into the matter in an attempt to rope in an Indian with an international exposure.