The finance ministry has said that not only government owned banks but even the private sector banks will have to sell products of multiple insurance companies. The ministry’s mandate to the PSU banks to follow insurance broking model was largely criticised by large banks which claimed they would be at a disadvantage to private banks which are not required to follow any such directive from the ministry. Rajiv Takru, secretary, Financial Services felt private banks should not be under the illusion that they will not be required to sell products of multiple insurance companies. If they don’t do it voluntarily, the regulator will issue a directive on it, said Takru. Large commercial banks including State Bank of India, ICICI Bank, Punjab National Bank and Canara Bank have entered into contracts to exclusively sell insurance products of their joint venture insurance partners. As a result, they follow a corporate agency model wherein they can sell insurance product of only one life and non-life company. Because of this arrangement, most banks have resisted to follow the finance ministry directive on adopting insurance broking model citing contractual obligation signed with their insurance partners. Takru had announced setting up of a committee, which will look into a ‘workable solution’ for banks adopt the insurance broking model.
