• PAGE ONE
• INDEX
• HOME

No legal curbs on entry into insurance, IRDA assures Nabard

Sarbajeet K. Sen

NEW DELHI, Aug. 15

THE Insurance Regulatory and Development Authority (IRDA) has assured the National Bank for Agriculture and Rural Development (Nabard) that there would be no legal or regulatory impediments for its proposed foray into the insurance sector.

Nabard representatives had met IRDA officials soon after the institution had decided to branch out into insurance. The meeting was aimed at ascertaining whether Nabard's status as a specialised development financial institution (DFI) ran against any of t he entry norms laid down for the sector.

``We had a meeting with the IRDA where we were informally told that there should be no problem for us to venture into the insurance sector,'' the Chairman, Nabard, Mr Y.C. Nanda, told Business Line during a recent visit to the Capital.

Mr Nanda said that since preparing concrete plans for entry into a new sector required a lot of detailed preparation, Nabard wanted to be doubly sure beforehand that the regulatory and legal framework allowed for entry of specialised DFIs.

Nabard plans to float a life insurance subsidiary which would primarily aim at tapping the rural market. It hopes to come out with a formal proposal for floating an insurance company during the last quarter of the current fiscal.

Mr Nanda said that after detailed survey by an in-house team, the apex rural finance institution has now hired the services of a senior retired Life Insurance Corporation (LIC) official to work out the details of the proposed insurance venture. ``The pro ject document is expected to be finalised very soon,'' he said.

The institution is also talking to several domestic and foreign companies for equity participation in the venture. ``Since we do not have the necessary skills for taking up the insurance venture in-house, we might have to hire the expertise of some other company. In the event we do not get proper expertise from a domestic company, we would have to settle for some foreign partner,'' Mr Nanda said.

He felt that the rural life insurance market remained largely untapped and that Nabard with in-depth knowledge of rural India was ideally placed to tap the potential. ``We need to come up with tailor-made products to suit the earning-profile of the rural population,'' Mr Nanda said.

He agreed that the rural insurance market could prove to be a tricky business. ``The low premium amounts and the high transaction costs have to be looked into. We would be very careful while preparing the details. We cannot let a company floated by an in stitution of Nabard's standing to fail. It would send wrong signals,'' he said.