MUMBAI: The Central Bank of India’s move to enter the insurance sector through a joint venture with Italy’s Generali Group raises an intriguing question: Has the state-owned lender made a preemptive move to secure a strong foothold ahead of a potential policy change allowing 100 per cent foreign direct investment (FDI) in insurance?
Talking to businessbenchmark.news, a former top official of United India Insurance Company said even if 100 per cent FDI is allowed in insurance sector, one has to wait and see whether foreign players would hurry to establish wholly-owned subsidiaries, or will they still prefer to partner with local entities to enter the Indian market until the market matures.
Some others view Central Bank’s forging joint venture with Generali group under Future Generali India Insurance Company Ltd (FGIICL) as a strategic move before foreign players would get busy with plans to enter the Indian market on their own without the help of Indian partners.
RBI approval
Central Bank of India on Friday said it has got approval from the Reserve Bank to enter the insurance business through a joint venture with Generali group though the approval from the insurance regulator, IRDAI, has to be secured.
While public sector banks such as SBI, Bank of Baroda (BoB), and Canara Bank have long established their footprints in the insurance business through joint ventures, Central Bank of India’s entry marks a late but strategic move.
With most insurance JVs proving profitable for banks – like SBI Life Insurance’s leadership in the private sector life insurance segment – Central Bank’s foray could aim to replicate this success. However, the timing raises questions.
In a competitive banking landscape, Central Bank of India could be seeking alternative revenue streams to enhance profitability. With declining interest margins and increasing stress in traditional lending portfolios, the insurance business provides an opportunity to capture steady fee-based income.
Great potential
With insurance penetration in India still hovering around 4 per cent of GDP, the sector offers untapped growth potential. Generali Group’s expertise and strong market position could provide the Central Bank with a competitive edge, allowing it to scale operations quickly.
The recent reports stated the Indian government is gearing up to allow 100 cent foreign direct investment (FDI) in insurance businesses.
This would allow global players to independently enter the market. It was also heard that individual insurance agents will be granted to sell policies from multiple companies, a significant departure from the current single-association cap.
The move is in harmony with the Central government’s broader goal of achieving “Insurance for All by 2047,” a vision recently emphasised by Insurance Regulatory and Development Authority of India (Irdai) chairman Debasish Panda.
With an FDI ceiling of 74 per cent currently, India’s insurance sector has 24 life insurance providers, 26 general insurers, six standalone health insurers, and one reinsurer – General Insurance Corporation (GIC).
