Co-op banks chalks out insurance plan

Co-op banks chalks out insurance plan

August 3: The National Federation of Urban Co-operative Banks and Credit Societies,(NAFCUB) president, HK Patil, who is also the Karnataka minister for major irrigation, said ideally, the urban co-operative banks would like to float two insurance entities with Rs 100 crore share capital each for life insurance and non-life insurance activities under the multi-state Co-operative Socities Act, 1984. However, the IRDA Act, 1999, and the amended insurance Act 1938, permit only Indian insurance companies registered under the Companies Act 1963 to undertake insurance business, he said.

``NAFCUB will commence dialogue with the Centre on this issue from next week,'' he said.

The NAFCUB will also seek permission from the Reserve Bank of India to allow the cooperative banks to contribute the share capital in the propopsed company.

Entering into insurance sector would help the cooperative banks to generate more fee-based income in future.

The contributions for the share capital would come from NAFCUB members, Patil said adding, at present, the urban co-operative banking sector consists of 2,000 urban banks with over Rs 70,000 crore of working capital and owned funds in excess of Rs 7,500 crore.

NAFCUB has decided to appoint a consultant to advise it on insurance venture and also a small committee to draft the bye-laws.

NAFCUB is open to the idea of having a foreign partner both in the insurance venture as there are number of international co-operatives in the field of general/life insurance.

According to Patil, it would have been ideal if the entire cooperative sector had promoted one insurance cooperative/company each in life insurance sector and in general insurance. However, since some of them like IFFCO, State Cooperative Banks chose to promote separate insurance entities, urban banks had to think of putting in a separate application.