Insurance Regulatory and Development Authority of India (IRDAI) has allowed Union Bank of India’s proposal to continue with its 30 prcent holding in IndiaFirst Life Insurance with the condition that the lender will hold no control in the management of the insurer.
Earlier, the bank was expected to divest either the entire stake in IndiaFirst Life Insurance, or a considerable part of it, as IRDAI guidelines restrict a lender to own more than 10 percent stake in two insurance companies.
The state-owned lender also holds 25.1 percent stake in Star Union Dai-Chi Life and it received a promoter stake in IndiaFirst Life Insurance in April previously held by Andhra Bank following its ‘mega’ merger on April 1 with Andhra Bank and Corporation Bank.
With IRDAI cleared, the state-owned lender has now been permitted to carry on with its promoter holding in the two insurers at least in FY21 under the condition that “arrangements are made to remove conflict of interest.”
This can be held by the Union Bank with no management control in IndiaFirst Life Insurance as well as by naming separate directors to be on the board or IndiaFirst and Star Union Dai-Chi, as per a letter sent by IRDAI to a top official at the bank.
In addition, any conflict in the decision will be noted by the “competent authority” that is the Reserve Bank of India, the letter said.
“The authority (IRDAI) has no objection…(for UBI) to hold existing shares of the erstwhile Andhra Bank in IndiaFirst Life Insurance for a period of 12 months following the merger,” according to the letter. “As the present situation has arisen from the merger of three banks, the Authority would permit UBI and insurers promoted by it a period of one year to reorganize the arrangements to remove conflict of interest issues which have arisen from the merger.”