Banks disallowed to hold more than 30% stake in other firms
MUMBAI: The country’s largest private sector lender, ICICI Bank, has got a respite for three years to continue holding more than 30 per cent ownership in its insurance arms – ICICI Lombard General Insurance Company Ltd and ICICI Prudential Life Insurance Company Ltd.
A notification from the Central government said the “private sector lender ICICI Bank has been exempted from provisions of the Banking Regulation Act relating to shareholding above 30 per cent in its two insurance subsidiaries.”
The Sub-section (2) of Section 19 of the Banking Regulation Act 1949 provides that no banking company will hold more than 30 per cent shares in any company.
“As previously announced by ICICI Lombard General Insurance Company Ltd, it has proposed an acquisition of another general insurance business, which if consummated will result in ICICI Bank’s shareholding reducing to less than 50 per cent,” the statement explained.
Last month, ICICI Lombard had announced the merger of Bharti Axa’s non-life insurance business with itself.
“The exemption during its operation may permit both ICICI Lombard General Insurance and ICICI Prudential Life Insurance to consider strategic options such as mergers and acquisitions or capital increase, which have the potential of reducing the bank’s shareholding and thus comply with the respective banking regulations,” said ICICI Bank.
However, it said there are no current plans for the bank to divest to less than 50 shareholdings in ICICI Prudential Life Insurance.
“There would be no impact on the current distribution arrangements. It may be further mentioned that the above is unrelated to the bank’s current assessment of its financial position and outlook,” the bank said further.