The Hindu Business Line : Canara gets into insurance with HSBC, Oriental Bank

HSBC PARTNERSHIP: The Finance Minister, Mr P. Chidambaram, with (from left) the CMD of Oriental Bank of Commerce, Mr K.N. Prithviraj; the Group Managing Director, Insurance, HSBC, Mr Clive Bannister; and the CMD of Canara Bank, Mr M.B.N.Rao, exchanging documents in the Capital on Monday after signing an MoU for establishing a life insurance company in India. - Kamal Narang

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New Delhi March 5 Canara Bank, HSBC Insurance (Asia Pacific) Holdings and Oriental Bank of Commerce (OBC) on Monday entered into a memorandum of understanding (MOU) for jointly establishing a life insurance company in the country.

While Canara Bank would hold a 51 per cent stake in the proposed venture, HSBC Insurance (Asia Pacific) Holdings and Oriental Bank of Commerce (OBC) would take 26 per cent and 23 per cent stake respectively in the joint venture.

The Union Finance Minister, Mr P. Chidambaram, in whose presence the MoU was signed today, highlighted that the proposed joint venture would be the 13th company, apart from LIC, in the industry.

He pointed out that virtually all the MoUs signed in the insurance industry during the last 24 months have been translated into companies.

"I have no doubt in my mind that this venture would obtain regulatory approval very shortly. We will be able to conclude documentation very shortly. I am confident that during the course of this calendar year this venture would take off," Mr Chidambaram said at the MoU signing ceremony.

Mr Chidambaram highlighted that India's insurance penetration was way below the world average. "This was one of the reasons why the Government wants to encourage Indian banks and financial institutions to work with leading financial institutions of the world and promote more insurance companies. We have miles to go," he said.

The Canara Bank Chairman and Managing Director, Mr M.B.N. Rao, later said that the new venture would to start with have a paid-up capital of Rs 200 crore and also a premium component of Rs 125 crore that would be brought in by HSBC.

He said that Canara Bank, which has been advised by Ernst & Young on this deal, would contribute Rs 102 crore towards the paid-up capital. HSBC will bring in Rs 52 crore as equity for its 26 per cent stake and also about Rs 125 crore towards premium.

"HSBC is paying a premium for the distribution network, brand value of the domestic partners and the customer base that the two banks readily offer for the new company," Mr Rao told Business Line.

He said that both Canara Bank and OBC cumulatively had a branch network of 3,600 branches and customer base of 40 million.

Mr Clive Bannister, who is global head of HSBC Insurance, said that there was enormous potential for insurance products in India given the low penetration. "We are delighted to be part of the joint venture. We hope to bring to this venture a set of skills from elsewhere in the world to make this union (three-way joint venture) a successful one", Mr Bannister said.

HSBC Insurance writes about 44 million policies a year in over 35 countries and accounts for over 10 per cent of the pre-tax profits of the HSBC Group.

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