Corporation Bank to enter life insurance business

By Our Special Correspondent

CHENNAI, JUNE 6. Corporation Bank has decided to enter the life insurance business through a subsidiary, for which the approval of the Reserve Bank of India will be sought, according to Mr. N. S. Gujral, executive director holding concurrent charge as chairman and managing director of the bank.

Addressing a press conference here today, Mr. Gujral said the bank was one of the few Indian banks qualifying for commencing a joint venture in the insurance sector along with a foreign partner.

Against the stipulated minimum net worth of Rs. 500 crores for foraying into insurance, the bank had a net worth of Rs. 1,145 crores. Similarly, capital adequacy was at a comfortable level of 12.8 per cent against the minimum required of ten per cent. The non-performing assets (NPA) level had been brought down further to a record low of 1.92 per cent from 1.98 per cent in 1998-99.

The bank's net profit had consistently improved and amounted to Rs. 232 crores in 1999-2000 against Rs. 192 crores in 1998-99.

A consultant would be chosen in the next few months to advise the bank on the insurance foray and choice of partner.

The bank might not stick to the short list of four potential partners prepared earlier since more companies had shown interest in the venture.

Most banks in the world which diversified into insurance chose the life sector rather than general insurance, Mr. Gujral said, and added that the insurance venture would be headquartered either in Bangalore or in Mumbai.

He said his bank had decided to go in for the U.S. GAAP (generally accepted accounting practices) and had appointed Deolitte Haskins & Sells as consultants for conversion of its financial statements to GAAP numbers. The work was likely to be concluded in the next fortnight.

Both the subsidiaries of the bank, Corpbank Securities and Corpbank Homes, were performing well and made `reasonable' profits.

Replying to questions, Mr. Gujral said the banking sector was ``not comfortable'' with the present declining trend in the exchange value of the rupee and hoped that something would be done about it.

He said the bank had taken up with the Indian Banks Association (IBA) the need to relax the stipulation in the agreement between the IBA and unions of a maximum of 70 per cent coverage of business through computerisation, since it had already reached 80 per cent coverage in the interest of improving efficiency and performance.

The response to the gold deposit scheme from the public as also temples was not upto expectations, he said.

Our Bangalore Correspondent reports:

The bank is reorienting its strategy with regard to its gold bond scheme. It has been one of the pioneers in the business of precious metals. It launched the gold deposit scheme initially in Mumbai and Delhi last year. But it was not up to the mark, he admitted.

To restructure its business, the bank will focus on Gujarat and Kerala, especially Kochi, where there is potential. It has convened a meeting of divisional heads in July to achieve a set target.

The bank has drawn up an ambitious plan for improving technology by networking and use of Internet. It has set aside Rs. 56 crores for this purpose.

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Section  : Business
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