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    Two proposed PSB merger plans may come under IRDAI scanner

    Two proposed PSB merger plans may come under IRDAI scanner

    Two proposed PSB merger plans may come under IRDAI scanner
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    By Yash Jain   IST (Published)

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    The two sets of the proposed public sector bank (PSB) merger may come under the scanner of the Insurance Regulatory and Development Authority of India (IRDAI) as it violates the insurance regulator's cross-shareholding regulations, multiple sources told CNBC-TV18.

    The two sets of the proposed public sector bank (PSB) merger may come under the scanner of the Insurance Regulatory and Development Authority of India (IRDAI) as it violates the insurance regulator's cross-shareholding regulations, multiple sources told CNBC-TV18.
    Last week, Finance Minister Nirmala Sitharaman announced the merger of 10 public sectors banks into four. The proposal would be executed in four sets under which  Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and United Bank will be merged to form India’s second-largest bank. Also, Canara Bank will merge with Syndicate Bank; Union Bank will merge with Andhra Bank and Corporation Bank while Indian Bank will merge with Allahabad Bank.
    According to sources, who spoke on condition of anonymity, the two sets of the proposed PSB merger will violate the IRDAI cross-shareholding regulations assuming the merger goes through in its proposed form.
    IRDAI's cross-holding regulations do not allow an individual or entity to hold more than 10 percent stake in more than one insurance company.
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    In the case of the merger proposal involving PNB, OBC and United Bank of India, PNB holds 30 percent stake in PNB MetLife Insurance whereas OBC holds 23 percent stake in Canara HSBC Oriental Life Insurance. This means that the merged entity will have over 10 percent stake in two life insurance entities violating the IRDAI’s regulations.
    In the case of the merger proposal involving Union Bank, Andhra Bank and Corporation Bank, Andhra Bank holds 30 percent stake in India First Life Insurance whereas Union Bank holds 23 percent stake in Star Union Dai-ichi Life Insurance. Again, the merged entity will have more than 10 percent stake in two life insurance companies.
    The IRDAI is currently in a wait-and-watch mode till final modalities, as well as the effective dates, are announced. Post that, IRDAI is likely to seek views from the merged entity regarding their plans to reduce stake in one of the two life insurance companies to below 10 percent, sources said.
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