Diluting its earlier tough stance, the Reserve Bank of India has decided to permit banks to undertake insurance broking business departmentally, subject to the requirements, including the minimum net worth of Rs 500 crore.

"Banks desirous of offering insurance broking services should seek specific prior approval of the RBI. Approvals would factor in the regulatory and supervisory comfort on various aspects of banks' functioning such as corporate governance, risk management and the arrangements proposed for undertaking insurance brokerage," the RBI said. The new policy will allow banks to sell policies of more than one insurer.

Currently, banks are allowed to sell products of one life and one non-life insurance companies as a corporate agent. The RBI was earlier opposing banks undertaking insurance broking business despite the fact that banks are well suited to distribute insurance products because of their wide network.

The RBI was worried about issues like mis-selling and certain restrictive and unfair practices such as linking provision of locker facilities to purchase of insurance products, selling of unsuitable and/or multiple policies etc. "The net worth of the bank should not be less than Rs 500 crore," the RBI said while unveiling the norms for banks entry into insurance broking. (Indian Express)