India public sector banks to open insurance business

Lenders take advantage of profitability of insurance and mutual funds operations in the long run.

For public sector banks (PSBs), foraying into insurance and mutual funds has always been a profitable game in the long run. State Bank of India is planning to venture into general insurance while Union Bank of India and IDBI Bank are set to roll-out their mutual fund business in the first quarter of FY2011.

"We are planning to venture into general insurance in the first quarter of next fiscal," said SS Ranjan, chief financial officer, State Bank of India. The joint venture with Insurance Australia Group will be named SBI General Insurance. Apart from being a long term investment, a foray into insurance business can help boost banks' fee income.

"The biggest advantage for a well-capitalised bank that decides to foray into insurance is its already established branch network," said Shweta Mane, banking analyst, Centrum Broking.

Next quarter will also see Union Bank of India and IDBI Bank enter the mutual fund industry, which currently manages assets worth Rs 7.82 lakh crore ($171.9 billion). "We will launch our mutual fund venture in the first quarter of next fiscal," said P Sitaram, CFO, IDBI Bank.

View the full story in DNA India.