RBI issues guidelines for banks to act as insurance brokers

The Reserve Bank of India on Thursday allowed banks to act as insurance brokers, set up their own subsidiaries and also undertake referral services for multiple companies, in a bid to increase insurance penetration in the country.

"Banks may undertake insurance agency or broking business departmentally and/or through subsidiary," RBI said in the guidelines for entry of banks into insurance business.

Banks have also been allowed to set up subsidiaries and joint venture companies for undertaking insurance business with risk participation, the guidelines said.

Lenders can also act as corporate agents without seeking prior approval from the central bank. However, they will have to comply with guidelines of Insurance Regulatory and Development Authority (Irda).

Under existing bancassurance guidelines, a bank can act as a corporate agent and sell policy of only one life insurer and one non-life insurance company.

The new norms allow the lenders to act as brokers permitting them to sell insurance policies of different insurance companies.

The guidelines follow an announcement made by former Finance Minister P Chidambaram in the 2013-14 Budget.

"Banks will be permitted to act as insurance brokers so that the entire network of banks' branches will be utilised to increase the penetration of insurance," the FY14 Budget had said.

There are about 87 commercial lenders in the country with 1.2 lakh branches.

There are 52 insurance companies operating in the country; of which 24 are in the life insurance business and 28 are in general insurance business. In addition, GIC is the sole national reinsurer.