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BoB seeks nod for 74 pc stake in insurance JV

Our Bureau

CALCUTTA, Dec. 5

BANK of Baroda (BoB) would like to hold, at least initially, 74 per cent equity stake in the life insurance joint venture it proposes to launch with a foreign partner. BoB has sought the Union Government's permission in this regard.

``The Union Government has already allowed State Bank of India to retain 74 per cent stake in its insurance joint venture and, therefore, there is no reason why we too will not get a similar permission,'' said Mr P S Shenoy, Chairman and Managing Directo r of BoB, while talking to newspersons here.

Under the law, any bank floating a joint venture for undertaking insurance business is supposed to have a maximum of 50 per cent equity holding in the venture.

A second partner, which would be a domestic firm, would also be involved in the insurance joint venture within one year and BoB would divest 24 per cent in its favour, Mr Shenoy said. The domestic partner would be one having a wide retail network and ope rational synergy with BoB. It could be a bank or a NBFC or some other organisation.

The selection of the foreign partner would be made from three to four foreign firms that had already shown interest. DSP Merrill Lynch is BoB's consultant in this regard.

BoB has applied to RBI for its in-principle approval. Once this was obtained, the foreign partner would be selected and application made to the Insurance Regulatory & Development Authority (IRDA) for licence.

The bank's board, he said, would consider the issue of VRS at its meeting to be held on December 13. ``The package will be on the line of what IBA has suggested'', he said and estimated that about 5,000 employees and officers out of a total of 46,000 wer e likely to opt for it. The cost of VRS would be about Rs 106 crore per 1,000 employees. The total outgo thus would be about Rs 530 crore if 5,000 employees opted for VRS, he said.

For funding VRS, the bank had sought the Centre's help, particularly as capital support.

BoB was laying emphasis on the computerisation of operations. It proposed to spend nearly Rs 400 crore in the next 18-24 months. More than 1,000 branches out of the total of 2,600 would be brought under the concept of core banking and nationwide connecti vity.

``We would take the help of foreign experts as to how to go about it and a foreign firm will be selected shortly''. Nearly 400 branches of the bank were loss-making and half of them were unviable; which would be either relocated or merged with other bran ches, he said.

BoB's share of net NPAs to net advances at 6.95 per cent amounted to Rs 2,200 crore. ``More than recovery, we are trying to prevent the accretion of fresh NPAs'', he observed. Arthur Anderson was advising the bank on risk management. Housing finance, mut ual fund and credit card businesses were its other thrust areas, he added.

Pic.: Mr P.S. Shenoy, Chairman and Managing Director, Bank of Baroda, at a press conference in Calcutta on Tuesday.

Picture by Parth Sanyal