Banking sources say PNB is likely to have board representation in PNB MetLife. A decision on this will be taken this week.
According to insurance regulations, a bank cannot promote more than one insurance company. The mergers, however, have created a problem: Many of these banks
are promoters of insurance firms.
Prior to the merger with PNB, Oriental Bank of Commerce held 23 per cent in Canara HSBC OBC Life Insurance.
Similarly, Union Bank of India - which has absorbed Andhra Bank and Corporation Bank - has 25.1 per cent stake in Star Union Dai-ichi Life Insurance, and 30 per cent stake in IndiaFirst Life Insurance.
It is believed that the regulator has also allowed the public sector lender to hold its promoter stake in both the insurance companies with board representation in one of the companies.
According to the regulations, an entity can either be an investor or a promoter in an insurance firm. If an entity holds more than 10 per cent stake in an insurance firm, it is a promoter. If the stake is less than 10 per cent, it is an investor.
The insurance regulator had earlier hinted at allowing the merged public sector banks
to hold over 10 per cent stake in multiple insurance companies, given they limit their promoter control to one entity and remain an investor in others with no say in management decisions.
“It is not prohibited by regulation. But it is prohibited because there will be conflict of interest. We can take care of this by allowing them not to participate in the decision-making,” Irdai
chairman had said on the sidelines of an Associated Chambers of Commerce and Industry of India event last year.
“If they give up seats on the board and do not take part in the decision-making process, they can still hold stake in as many firms as they may want to,” he had said.