News: Bank of Baroda poised for European link-ups

(BS 03/01/2007) Mumbai - Bank of Baroda (BoB) is poised to sign life assurance and asset management joint ventures with European partners as early as the end of this month.

With 2,700 branches and 27 million customers, the country's fourth largest state-owned bank already had the infrastructure in place to sell its own insurance policies, said Anil Khandelwal, chairman and managing director, Bank of Baroda.

“It is like a railway line which is already there, you just need to bring the bogey and run it,” he told the Financial Times. Although, he declined to name the likely partners for the new ventures, saying only that they are both Europe-based companies.

Foreign companies have been queuing up to enter India's insurance and asset management markets, which is growing faster after being hampered for years by red tape.

“On the asset management side, if you take the top 10 to 15 players from the US or Europe - practically all of them are looking to enter India,” said Sanjay Aggarwal, National Industries director financial services for KPMG in India.

He said in the insurance sector, in addition to existing players there are about 5 to 10 top global firms considering entering the Indian market, in which premium income is growing 70-100 per cent annually compared with the marginal growth in developed markets.

India deregulated its insurance industry in 1999, for the first time allowing Indian private sector institutions and foreign companies to mount a serious challenge to the country's twin state-owned monopolies: the Life Insurance Corporation (LIC) of India and the General Insurance Corporation (GIC) of India, which provides non-life products.

Foreign insurers is already active in India include ING, the UK's Prudential, Sun Life, Axa, Allianz and others. Domestic private and foreign insurance joint ventures have gained a market share of 35 per cent in life and 30 per cent in the non-life sectors.

Foreign asset managers already present in India include Fidelity and Franklin Templeton, with others such as UBS and Credit Suisse believed to be keen to expand in India.

Khandelwal said Bank of Baroda (BoB) would allow its foreign partner in the asset management business to take majority control.

In the insurance business, government restrictions limited the foreign partner to 26 per cent. Baroda and its foreign partner will also invite another Indian company to take stake. This might be a bank or an “industrialist”, he said.

Previously, BoB had been in talks with Nippon Life but these were scuppered by regulatory issues in Japan.

One or both deals may be concluded by the end of this month.