Recently, RBI released draft guidelines for comments and feedback on Banks entry into Insurance Broking Business.
What is Insurance Broking Business?
Insurance broking is a business wherin the broker ( in this case bank) dispense expert advise on various insurance products available in the market to the customer, so that they can choose the best insurance product suiting their requirements. They help the customers to get a fair value of their money. Basically, insurance broker act as a intermediate between the customer and the insurance companies offering various insurance products.
Can all banks enter into Insurance Broking?
All Scheduled commercial banks can enter into Insurance broking except RRB’s(Regional Rural Banks) .
Are there any eligibility criteria for banks entry into Insurance Broking ?
Yes, following are the requirements, that must be fulfilled by banks in order to enter into insurance broking.
1- Bank’s net worth must not be less than 500 crore.
2- Bank must have been showing profit since last three consecutive years.
3- Bank’s NPA(Non Performing Asset) must be below 3 %
4- Bank’s CRAR( Capital to Asset Ratio) should not be below 10%
What other requirements are necessary for the banks entry into insurance broking ?
Few requirements are as follows:
1- Banks must comply with the guidelines issued by IRDA
2- Banks must not enter into any agreement with Corporate agencies for insurance.
3- Customer grievance system needs to be set up by the banks to address customer’s concerns.
Does banks need to take any prior approval before entering into the business ?
Yes, a prior approval from RBI is mandatory.
Will the guidelines issued be reviewed later?
Yes, guidelines will be reviewed after 3 years.
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