The finance ministry does not intend to relax the norm that public sector banks apply for an insurance broking license to sell policies of all insurers, says Rajit Takru, secretary, union finance ministry. He clarified that the ministry has not asked the banks to start acting as brokers immediately. All it i s saying is that it will not renew the banks’ corporate agency tie-up with insurers as and when it expires. In December, the finance ministry sent a circular asking public sector banks to take up insurance broking by January-end to keep up with the spirit of the budget announcement of increasing penetration particularly in the rural areas. Takru said as discussions with the IRDA, banks need to start applying for a broking licence as no new renewals will be given after January-end for corporate agency tie-ups with insurers. Under the present system of distribution of insurance products through bank branches, banks act as corporate agents and sell the policies of only one life insurer, one non-life insurer and a standalone health insurer. While the IRDA and the Reserve Bank of India have cleared the decks by issuing guidelines on insurance broking norms, banks have not shown any interest so far in taking up broking. Many bankers are concerned that 25% cap for business done within the promoter group will be against the contractual obligation with foreign joint ventures of insurance companies, which have paid hefty premium for exclusive bank distribution network. However, Takru dismissed these concerns and said when a new law comes into force, the earlier contractual agreement will become void. He also said foreign joint ventures of insurance companies should see it as an opportunity to tie up with more banks.
