Mumbai, June 7: State Bank of India is set to storm the rural segments of the country with an array of insurance products. To start with, State Bank's subsidiary will offer crop, cattle and rural medical insurance. The subsidiary is likely to be set up in six months."We will enter the insurance sector in a big way. It will change the face of the rural economy. An extensive list of products has been drawn up. The insurance business will complement our lending activities in rural and semi-urban India," chairman MS Verma said on Sunday.The bank says it plans to corner a chunk of industrial insurance by virtue of its unparalleled captive client base in the manufacturing sector.The insurance subsidiary, with an authorised capital of Rs 500 crore, will initially have a paid-up capital of Rs 100 crore."We are closely looking into the equity structure of the insurance subsidiary. The finance minister had announced that the insurance sector will be opened to private Indian companies. If we are allowed tooffer an equity stake to a company registered in India, we may offer it less than 26 per cent stake initially," Verma said."An Indian company clearly means a company registered in India and also controlled by Indian shareholders," finance secretary MS Ahluwalia had clarified last week. However, whether foreign equity will be allowed as a minority holding is not yet clear. "We are exploring all options. It could be a technical tie-up.or even we can set up a wholly-owned subsidiary and buy technology," Verma said.Incidentally, State Bank is set to float its two credit card subsidiares - both joint ventures with GE Caps - on July 1. According to Verma, if the Reserve Bank of India allows banks to sell insurance products as part of its regular banking activity, State Bank will do so without floating a separate subsidiary. "Now banks are allowed to do leasing business. Similarly, if the RBI allows us to sell insurance products, we will do that," he said.Once State Bank - with its 8,500-and-odd branches- enters the insurance business, there is likely to be a shakeout in the industry. Term lending institutions IDBI, ICICI and others including UTI and HDFC are chalking up plans to make a foray into insurance. HDFC has tied up with UK's Standard Life, while ICICI has tied up with Prudential to enter the life insurance business.State Bank had, two years ago, held a preliminary round of talks with the NatWest Group for a possible alliance. Explaining the logic behind the focus on the rural segments, Verma said: "About 70 per cent of our branch network is located in rural and semi-urban India. The branch managers are in direct contact with the people. There are occasions when the bank waives interests on loans.The insurance business will complement our lending activities."
