To curb mis-selling, IRDA favours banks marketing insurance policies

The Insurance Regulatory and Development Authority may favour allowing insurance companies to use the network of bank branches to sell policies, if banks opt to take on the role of insurance brokers.

According to current IRDA guidelines, a broker has to set up a separate subsidiary with a separate share capital for distribution of insurance products. However, the insurance regulator is considering amending this regulation to allow banks to distribute insurance through their existing branches without setting up a separate subsidiary, said a senior IRDA official.

However, the Reserve Bank of India in its Financial Stability Report (FSR) said that banks assuming the role of insurance brokers may lead to conflict of interests. Where the bank has promoted an insurance company, it may also expose the bank to reputational risks.

According to T.S. Vijayan, Chairman, IRDA, banks which have a fiduciary responsibility under broking guidelines will represent the customer rather than the insurance company under the present corporate agent set-up. So, it is expected to bring down any chances of mis-selling.

Under the current bancassurance (distribution of insurance products through banks) model, a bank is allowed to become corporate agent of only one insurer — it can sell insurance products of one life, one general insurer and a standalone health insurer. But after becoming a broker, banks can sell products of multiple insurance companies.

The life insurance industry has made a representation to the insurance regulator, stating that a bank should be allowed to sell policies of five companies, with not more than 25 per cent share per insurer.

For major banks, insurance distribution is an important component of its fee-based income. According to a recent report by SBICAP Securities, bancassurance contributes to around 40 per cent of the new business premium collection by private life insurance companies.

“Banks have a huge customer base but that much utilisation has not happened for distribution of insurance products. There have been deliberations on how best to utilise bank branches to improve insurance penetration. Few ideas have come up and we are in constant dialogue with all the various stakeholders,” said Vijayan

deepa.nair@thehindu.co.in

Source: thehindubusinessline

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Muthoot may turn 2,000 gold-loan outlets into bank branches

The largest pure-play gold mortgage player Muthoot Finance , which has applied for banking licence, has said it can easily launch commercial lending business with as many as 2,000 branches.


"We are confident of getting a banking licence from the Reserve Bank, given our reach in rural markets and our over a century of experience. In fact, our experience is the biggest asset and we are better suited than many other applicants in this regard," Muthoot Finance managing director George Alexander Muthoot told PTI from the headquarter in Kochi.

Many of its branches are in tier 2,3 & 4 towns and they can be immediately converted into a full-fledged bank branches. Muthoot said 4,200 branches, large existing customer base and strong brand image makes it an eligible candidate.

With 74 years in gold financing, the company has over 4,200 gold loan outlets across 21 states and four Union territories, and employee strength of over 25,000 with a gold loan portfolio over Rs 26,000 crore as of last fiscal.

"With our last mile connect in to the hinterland, a banking licence will enable us to play a larger role of financial inclusion by taking these services to the unbanked and undeserved population of the country," Muthoot further said, adding that around 60 per cent his existing branch network is spread across tier 2, 3 and 4 markets.

On whether the company will continue with the gold loan business if it gets a banking licence, he said there is no question of shutting that down as there is no regulatory requirement to shut down the existing business.

About meeting the funds requirement for the banking foray, he said arranging Rs 500 crore, which is the RBI prescribed net-worth for bank holding company, will not be difficult.

Muthoot Finance and 25 other companies, including Tatas, Reliance, Birla and India Post, have applied for bank license.

Last month the company got an in-principle go-ahead from the RBI to launch white-label ATMs and it plans to set up at least 9,000 money vending machines over the next three years.

Source: MoneyControl

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Women bankers may get leg-up with Mahila Bank

Women bankers looking for better career prospects, while also boosting financial access for the fairer sex, will soon have the option to move to the Bharatiya Mahila Bank (BMB) that will be ready to commence operations by November.

While the government is yet to finalize the chairperson for the all-women bank, sources said that Punjab National Bank executive director Usha Ananthasubramanian is the frontrunner for the job. If the appointment comes through, she will have a five-year run at the bank and will be able to implement the plan better than someone with a short tenure, sources said.

For the others, the finance ministry has written to public sector banks to allow women employees on deputation - a tough ask given that most state-run lenders are already complaining of staff shortage. But with a new bank in place, bankers expect not just better work conditions for women employees but even faster promotions. Although intake of women employees has gone up in most public sector banks, several drop out after putting in a few years due to difficult postings, often in rural areas or small towns.

Finance minister P Chidambaram had announced plans to set up probably the world's first women-focused bank in his Budget speech and had set a November deadline for the launch. While the original proposal was to get the lead bank in every district to set up a branch dedicated to women customers and all employees, other than the guard, being women. But it was tweaked later on the advice of Congress president Sonia Gandhi and her advisors. The government is looking at BMB to sell the idea as a tool for women empowerment after its image took a severe hit after the Nirbhaya rape case in December.

Government officials told TOI that the bank has received in-principle approval from the Reserve Bank of India, which is vetting the memorandum and articles of association. Simultaneously, it is identifying premises to start operations. While two buildings have been identified in Delhi for the bank's headquarters, other premises would be finalized by August 15.

Source: TimesofIndia

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Andhra Bank donates Rs 1 cr to Uttarakhand

Andhra Bank has donated Rs 1 crore to the Chief Minister’s relief fund, Uttarakhand, to provide relief and rebuilding measures in the wake of recent floods.

All the employees of the bank had also donated one day’s salary to the Prime Minister’s national relief fund, according to a release.

Source: thehindubusinessline

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IndusInd Bank likely to enter gold loan business this quarter

Private sector lender IndusInd Bank is likely to foray into the gold loans business in this quarter, the bank chief Romesh Sobti said.

The bank is likely to set a conservative loan-to-value (LTV) ratio of 50-65 per cent depending on the client profile.

LTV is the amount of loan a borrower gets against the value of the collateral. So, in the case of IndusInd Bank, if a customer pledges gold amounting to Rs 10,000, he will get a loan of Rs 5,000-6,500.

According to Sobti, the industry has learnt its lessons with regard to the LTV ratio.

“These gold loans can be for any end use — either consumption or productive. The demand for gold loans is good and the default rate is very low. Regulatory issues are also very clear now,” said Sobti on the sidelines of his bank’s financial results conference.

The mid-size bank has hired Padmanabhan R., who was earlier with HDFC Bank, to take charge of the gold-loan segment.

According to Sumant Kathpalia, Head- Consumer Banking, said, “To begin with, the growth in yields won’t be very high and would range around 14-17 per cent.” In the Indian context, gold loan is a critical product for many borrowers. It has emerged as a great way to raise short-term capital in an expeditious manner, said Sobti.

With less than 2 per cent of the country’s gold holdings being used as collateral for getting loans, “any gold loan product has huge potential,” he said.

“We are not targeting the bottom of the pyramid. Our aim is to focus on the metros for now and largely we will be looking at self-employed people as customers. Also, we are not necessarily looking at high growth, but at the right clients,” Kathpalia said.

India is one of the largest markets for gold, accounting for about 10 per cent of the total global gold stockpile.

The bank will launch the loan against gold product at select branches as it involves high operational costs due to the high value of the asset involved in the segment.

Despite the presence of established non-banking players such as Mannapuram Finance and Muthoot Finance, the bank feels there is enough space for other financial intermediaries to enter this segment.

beena.parmar@thehindu.co.in

Source: thehindubusinessline

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