India's largest bank, the State Bank of India (SBI), said Thursday, November 30, it would announce its selection of a joint venture partner for the life insurance business in a couple of weeks.
"Discussions are at an advanced stage. We expect to select our partner in about two weeks time and then apply for a licence," a spokesman told AFP.
India recently opened up the insurance business and issued the first set of three licences earlier this month.
Government rules stipulate that private insurance companies should be capitalized at a minimum of one billion rupees ($20 million) of which a foreign partner cannot hold more than 26 percent.
The SBI insurance venture will be capitalized at around two billion rupees, said the spokesman.
"We will be much above the minimum level. Currently we plan to get into the life insurance business. We will test the market and then take a decision on whether or not to get into non-life insurance."
The spokesman said SBI with its country-wide network of branches and its "reputation" was best placed to enter the insurance market.
"We have a very good reputation in the banking business. We would like to leverage that."
While the state-owned Life Insurance Corp of India (LIC) will continue to be the market leader, the spokesman said SBI would soon take second spot.
"LIC is a behemoth. They will continue to be the leader for some time and it will be difficult to dislodge them, but we will be their only competition in the market. We will give them a run for their money."
Analysts expect the life insurance market to grow annually at 20 percent.
"There will be enough place for all private players, even though the base is quite big," said Devesh Kumar at ICICI Securities.
The SBI group accounts for about 30 percent of the deposits and loans of the country's banking system.— (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)