In other words, the RBI does not mind banks to act as brokers for insurance products but has serious reservations about all banks taking up the insurance business on their own.

The RBI has recently sent the note on banks' entry into the insurance sector to the finance ministry. A high-level meeting between the ministry is likely to take place soon. According to sources, the meeting was originally scheduled in the last week of March but was postponed.

Unlike the corporates, banks willing to enter the insurance sector will be subject to dual regulation -- RBI as well as the Insurance Regulatory Authority (IRA). The Government will also be required to amend the Banking Regulation Act to enable banks to enter into the insurance sector.

"The central bank sees no problemin commercial banks selling insurance products across the counter at their branches. However, it is not very comfortable about allowing all banks to float insurance subsidiaries to take up the new business," finance ministry sources said.

The RBI has proposed to lay down norms for banks' entry into the new sector. According to sources, the focus will be primarily on three aspects: the capital base of the bank, capital adequacy ratio and the percentage of non-performing assets (NPA). Besides, there will be emphasis on the branch network as well.

"Going by the RBI-stipulated norms a few banks will be allowed to take up the new business. At the first stage, the State Bank of India may turn out to be the only bank to get the nod," sources said.

The State Bank has already shortlisted three consultants-Arthur Andersen, JP Morgan and PricewaterHouse Coopers-from which the bank will eventually select one, to help it in scouting for a joint venture partner in the insurance business.

The list of banks andfinancial institutions (FIs) in the process of finalising plans to foray into life insurance business includes ICICI (with Prudential), HDFC (with Standard Life), Unit Trust of India, Bank of India, Bank of Baroda and Vysya Bank.

Industrial Development Bank of India (IDBI) and Industrial Finance Corporation of India are also planning to enter general insurance business.

Among the prominent non-banking finance companies, Kotak Mahindra is interested in both life and as well as non-life sectors (for the non-life business, the company has tied up with Chubb of the US) while Twentieth Century Finance-with a tie-up with Canada Life-is planning its foray into the life insurance segment and Alpic Finance is looking into the non-life sector. The modified IRA Bill has proposed that the new insurance company (life and non-life) should have a minimum paid up share capital of Rs 100 crore and reinsurance company Rs 200 crore. The standing committee on finance has recommended that the requirements of paid-up sharecapital should be exclusive of the deposits and preliminary expenses that may have to be incurred by the company at the time of incorporation.