The move comes after the government had in August announced the second round of bank mergers under which 10 banks will merge to create just four large banks.
Accordingly, the third largest public sector lender Punjab National Bank will take over Oriental Bank of Commerce and United Bank of India; Syndicate Bank will merge Canara Bank; Andhra Bank and Corporation Bank will be amalgamated with Union Bank; and Indian Bank merging with Allahabad Bank.
"We are thinking of allowing state-run banks to own more than 10 percent in more than one insurance companies, but to have management say in only one of them," Khuntia told reporters on the sidelines of an Assocham event here Friday.
If a bank gives up the board membership of invested insurance companies and abdicate the decision-making process, then it can hold more than 10 percent stake in many of them but operating in the same segment-which is life or general, the regulator clarified.
The insurance regulator also wants more insurance companies to go public to get better valuation which has been evident from the valuation of the listed insurers like HDFC Life, ICICI Prudential, ICICI Lombard General, and SBI Life.
"We'd like more insurers to be listed. Earlier, we had come out with a draft demanding all those completed 10 years of operations should list but they some of them are finding difficulties in share sale as some they are still yet to cross the critical size even after 10 years. Given that, we are not forcing them but nudging them," Khuntia said.
He said Irdai had given approval to Reliance General for listing but probably it may not go through now.
Raising concerns over the low insurance penetration the country he said only 10 percent of what could be insured is covered now.
"We have a protection gap of 90 percent now, whereas in Japan the protection level is 44 percent, in Taiwan it is a high 84 percent and Australia has a protection level of 67 percent. So, this is the gap that we have to bridge," he said.
On the persistency level in the insurance space, he said while the world average is 90 percent, our average is just 65 percent, he said, adding however that some domestic insurers have come close to 90 percent but he wants to see all of them touching the 90 percent mark.
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