STATE BANK OF INDIA COULD GO IT ALONE ON INSURANCE

State Bank of India (SBI) is considering 100% ownership of its proposed non-life insurance venture, partly because it feels that the arguments in favour of taking in a foreign partner are less compelling than they were a few years ago, reports India’s Economic Times . When the Indian insurance sector was first liberalised, foreign partners were needed, not just for capital, but also for their expertise, actuarial skills and modern systems. Today there is a second line of thought that, unless capital is needed, consultants and actuaries can be used rather than bringing in a foreign stakeholder. SBI has no shortage of capital, so a foreign partner is not necessary for the funds. “If Reliance can have a wholly-owned subsidiary in non-life insurance, there is no reason why SBI cannot do it”, an unnamed senior SBI official was quoted as saying. SBI’s foreign partner in its life venture is France-based Cardif, which holds the maximum 26% stake. In regulatory terms, the Reserve Bank of India permits banks to invest up to 10% of their net worth in an insurer, with the maximum shareholding limited to 50%. A special dispensation would be required for a holding of more than 50%, but this was granted to SBI in the case of its life venture. The bank continues to hold talks with a number of foreign players, and observers noted that SBI could be playing its own form of brinkmanship by floating the idea of 100% ownership now.