IndusInd Bank's Next Big Leap
Entry of Indusind Bank in the insurance business is likely to put the bank in the league of country's two top banks the HDFC Bank and ICICI Bank. Indusind Bank is planning to cross sell the insurance products of Reliance General Insurance (RGIC) and Reliance Nippon Life Insurance (RNLIC) and has also applied for a para banking licence with the Reserve Bank of India (RBI), sources told BW. Last year, the bank's MD and CEO Sumant Kathpalia had declared that they would also apply for a licence with the Insurance Development and Regulatory Authority (IRDA).
The Hinduja Group, which is the promoter of Indusind Bank, has emerged as the successful applicant to acquire Reliance Capital (RCap) in the Corporate Insolvency Resolution Process. A bid by Indusind International Holdings (IIH) and AASIA Enterprises LLP, the two Hinduja Group entities, has been approved by the National Company Law Tribunal (NCLT). IIH is the promoter of Indusind Bank. The entity is the holding company for the Hinduja Group.
Indusind Bank is among India's top ten banks with a market capitalization of more than Rs 1.2 lakh crores. Indusind Bank is into the commercial vehicles financing business and are among the top three players in the segment. Hence, the bank believes there is a synergy for it to get into other insurance businesses as well. Kathpalia is the brain behind the ambitious plans of the bank.
It is likely that Indusind Bank may hold a stake in the two insurance companies in accordance with what is allowed under the automatic route by RBI, the sources said. The decision to purchase the stake may be announced once the Hinduja Group closes its deal to acquire RCap. Banks are allowed to hold up to 9.99 percent stake in insurance companies as per the automatic route. Overall, RBI allows banks to own less than 30 percent or more than 50 percent stake in insurance ventures for which they have to apply for permission. Indusind Bank may give shape to its grand plan in the insurance sector after RCap's deal, the sources said. RGIC and RNLIC are RCap companies and it also has a health insurance and asset reconstruction business too.
In the past few years, India's big banks have acquired stakes in large insurance companies and are cross selling their products. Kathpalia has stated in the past that they don’t want to be mere investors in a (insurance) company but the manufacturer (of products). He had also said that RCap had the right products and segment to penetrate the client wallet.
Currently, Indusind Bank has a few tie-ups in the life and non-life insurance space and a partnership business in the mutual funds segment. But once the Hinduja Group closes the deal to acquire RCap, the Indusind Bank may be in a position to get into the insurance and asset reconstruction segment as well through direct ownership of businesses. Only as per the guidelines of the Insurance Development Regulatory of India (IRDAI) guidelines & RBI stipulations, the stake purchase in the insurance companies has to be at an arm's length and also at a fair valuation.
RBI appointed administrator has submitted the name of IIHL as a successful bidder to the NCLT, which approved it. IIHL made a cash offer of Rs 9,661 crore in the second round of the auction held on April 26 last year. RCap was the third major non-banking financial firm to be cherry picked by the RBI in November 2021 under IBC after Srei Group and Dewan Housing Finance Corp.
Emails sent to Indusbank on mediarelations@indusind.com and other ids remained unanswered.
