ICICI Bank To Help Insurance JVs

MUMBAI: Even if RBI permits ICICI Bank''s proposal to establish a holding company for its insurance and asset management businesses, the private bank will have to not only lend its brand and give technical support, but also chip in if the insurance JVs are in trouble. The Insurance Regulatory & Development Authority (IRDA) has put in the condition while approving the private bank''s proposal to establish an intermediate holding company between the insurance firm and the bank. Since IRDA had issued the insurance licence based on ICICI Bank''s balance-sheet, the regulator seeks the bank to take full resposibility for any eventuality.

According to the bank''s proposal, which has not gone down well with RBI, ICICI Bank wants to transfer its equity stakes in the insurance and asset management JVs to a holding company. In return, ICICI Bank will get shares of the proposed holding company. Though IRDA approved the proposal, it has been categorical that the bank, and no other entity, can be the promoter of the insurance companies. IRDA, however, has not stipulated a minimum shareholding that ICICI Bank has to maintain in the holding firm.

Banking circles think if RBI eventually approves the structure, it will ensure the holding company, which is like a special purpose vehicle, is regulated and not over leveraged. This will mean there could be serious restrictions on whether the holding company can borrow, or raise debt capital, to invest money into the insurance company. Secondly, the bank has to spell out the ways it is exposed to the insurance business and, thirdly, the regulations that will apply to an investment company managing the group investments and whether such an entity would have to be registered with the central bank.

Source : www.indian-commodity.com