LIC keen on stake buys in banks

Life Insurance Corporation of India is interested in picking up stakes in banks that have good financials and performance, with the insurer likely to prefer banks with which it has bancassurance tie-ups. Bancassurance enables the insurer to distribute insurance products through a bank’s network.

D K Mehrotra, managing director, LIC, however, said that bancassurance was not the only criterion. "We pick up stakes in banks for purely commercial reasons and not strategic ones. Though we have tie-ups with over 30 banks, we are not looking at all the banks. We will look at banks that have good financials and performance,” he said.

With the company already having stakes in the UTI Bank, Corporation Bank, Oriental Bank of Commerce (OBC), State Bank of India (SBI) and City Union Bank, experts associate the insurer’s move with its interest to get into banking.

This month, LIC picked up 15,00,000 equity shares at Rs 169.15 per share in the City Union Bank, which has tied up with LIC for offering insurance-linked banking products.

According to market sources, LIC’s interest in the City Union Bank is part of its larger design to pick up stakes in small private sector banks, as it would have a greater say in the management of small banks, unlike the bigger ones such as UTI, OBC and Corporation Bank in which it has stakes. For smaller banks, a tie-up with LIC would help them raise the much-needed funds for revival, sources added.

Read more in The Business Standard article.