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INSURANCE Regulatory and Development Authority (IRDA) has granted an in-principle approval to the State Bank of India (SBI) for its proposed non-life joint venture with IAG of Australia.

   In its board meet, the regulator also approved a life insurance joint venture led by Bank of Baroda and UK’s Legal and General. With the in-principle approval, the two JVs have cleared the ‘R1’, or the first of a three-stage process, in acquiring a licence to do business. The partners have to finalise second stage and submit their business plan while in the third stage, the partners receive permission to commence business after they bring in the required capital.

   SBI had identified IAG as a partner a year ago. However, its application to IRDA got delayed because of the global financial crisis, following the Lehman collapse. The joint venture company is likely to start operations in the fourth quarter of the current fiscal. SBI will receive a substantial premium from IAG, which is keen to establish a presence in India. SBI’s entry is expected to shake the non-life industry because the bank has a distribution network of close to 14,000 branches and is a formidable player in auto and home loans. The banks’ leadership position in these businesses is expected to give it a strong foothold in auto insurance.

   IRDA has also cleared the application of Bank of Baroda for its joint venture with UK insurer Legal & General. Andhra Bank is a third partner in the life venture with 30% stake. Bank of Baroda and Legal & General hold 44% and 26%, respectively. Former head of Reliance Life Insurance P Nandgopal is likely to head this joint venture.

   IAG, formerly known as Insurance Australia Group, provides insurance in Malaysia and Thailand in Asia. In China, IAG has a roadside assistance operation and insurance agent, China Automobile Association (CAA).

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