Finmin wants PSBs to exit insurance
The finance ministry has circulated a proposal that aims to ask state-run banks to exit noncore businesses, notably insurance, to force greater capital efficiency and ensure that periodic capital infusion into them goes into increasing the spread of banking rather than propping up money-losing ventures. “The money provided through recapitalisation support is for core banking activities such as increased lending and branch expansion. Banks with interests in other areas may divert the funds, which is not desirable,” a senior finance ministry official told ET. The proposal, which is in the early stages of debate and discussion within the ministry, reasons that noncore businesses such as insurance are highly capital intensive and can take up to 10 years to be profitable. India’s life insurance industry posted a combined net loss of Rs 4,878.49 crore in 2008-09 , up 43% from a year ago. Of 22 life insurers, only four have reported profits, data from insurance regulator Irda shows.