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Bancassurance an Overview

    IndianMoney.com Research Team | Tuesday, April 07,2009, 09:45 AM
 

World over the plan of separation of roles between banks and other financial activities has become redundant. Even in the United States which was known for strict partition of banking and nonbanking activities during the Glass-Steagall Act regime broke the separating wall. The post Gramm-Leach-Bliley (GLB) Act, 1999 scenario, it is stated to have increased preference for banks conterminously dealing with other non-banking financial products, as well as the insurance products. In Asian countries (e.g., Taiwan, Singapore, Japan, etc.) also, the trend has been placed towards financial supermarket. The financial liberalization and financial innovations have drawn the worlds of banking and insurance nearer.

In India, constantly espousing of financial reforms following the recommendations of First Narasimham Committee, the current financial landscape has been reshaped. Banks, in particular, stride into several new areas and propose innovative products, viz., merchant banking, lease and term finance, capital market/equity market associated activities, hire purchase, real estate finance etc. Thus, present-day banks have become extreme diversified than ever before. Therefore, their incoming into insurance business is only a natural corollary and is fully justified too as ‘insurance’ is another financial product necessary by the bank customers.

The Reserve Bank of India being the regulatory authority of the banking system, identifying the need for banks to diversify their actions at the right time, permitted them to enter into insurance sector as well. Furtherance to this line, it issued a set of complete guidelines setting out different ways for a bank in India to enter into insurance sector (Annex I sketches out the guidelines).In the insurance sector, the Insurance Regulatory and Development Authority (IRDA), in spite of its recent origin in 2000, avowed to Regulate and develops the insurance sector in India through calibrated strategy initiatives. Given India’s size as a continent it has, however, a extremely low insurance penetration and low insurance density. As opposed to this, India has a well well-established wide branch network of banking system which only few countries in the world could relate. It is against this backdrop an attempt is made in this paper to discover the ‘bancassurance strategy’ which integrates banking and insurance sector to harness the synergy and its allied problems and prospects in the Indian context.

IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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