Para banking is nothing but undertaking para-banking activities through subsidiries.These activities may among others include housing finace,equipment leasing,factoring etc.The government of India issued a notification in August 2000specifying therein insurance as a permissible business under Banking Companies Regulation Act 1949.Banks are now permitted to establish their own subsidiaries for undertaking life insurance business.Life insurance subsidiary can be set up on risk participation basis with 74 percent equity holding by a bank.
Banks are also permitted to make investment in life and non-life insurance joint ventures on risk participation basis.Banks are allowewd to act as corporate agents of insurance companies for distribution of insurance products on fee basis.This however requires prior approval of IRDA.This helps banks to earn fee based income withot any risk.
No comments:
Post a Comment