RBI tells banks to cap stake in insurance companies at 30%


  • Move aimed at shielding lenders from non-bank risks, steering focus to boost credit growth
  • Banks have asked the regulator for five years to implement the rule but they may get just three years


MUMBAI : The Reserve Bank of India has asked lenders to cut their stakes in insurers to 30%, as the banking regulator attempts to shield banks from risks arising out of their non-banking businesses and steer focus to boosting credit growth in a slowing economy, four people with direct knowledge of the matter said.


RBI informed the bankers in a meeting last week that it will soon introduce rules to cap their holdings in an insurance company to 30%, the people said, requesting anonymity as the matter is confidential. The holding limit will be 50% for non-banking financial companies such as Housing Development Finance Corp. that have insurance units, they said. Banks have been told to await RBI’s official communication on the new rules.


The move is likely to have far-reaching impact not only on banks, which derive significant income from their insurance units, but also on the insurers themselves as their parent banks are major capital providers and distributors of insurance products. State Bank of India, ICICI Bank Ltd and Kotak Mahindra Bank will be among the lenders to be affected by the decision.

“The 30% capping rule is meant to safeguard banks from capital risks arising from non-core businesses. But the new RBI rule, which is likely to come into effect some time in fiscal 2021, will create a huge supply of equities in the market when the banks slash their stakes. It is to be seen if the market has an appetite to absorb such large amount of liquidity,” said the first of the four people. The rule is likely to be implemented in a phased manner, the person added.


“RBI is asking us to rather use the money for credit growth. RBI is suggesting banks to increase Tier 1 networth,” said the second person. “There should not be much of a problem as some of the insurance firms are listed. We (as a bank) have to give a roadmap to RBI as in when we will bring down stake to 30%. We have asked for five years but they (RBI) will not give five years. They may say three.”

Current regulatory norms mandate that a bank can hold a maximum of 50% in an insurance venture but the regulator may allow them to hold more on a case-to-case basis.

In the life insurance space, ICICI Bank owns 52.87% in ICICI Prudential Life Insurance Co. Ltd; Kotak Mahindra Bank holds a 77% stake in Kotak Mahindra Life Insurance Co. Ltd; and State Bank of India owns 57.6% in SBI Life Insurance Co. Ltd. Home financier HDFC holds 51.47% in HDFC Standard Life Insurance Co. Ltd.


Among general insurers, HDFC holds 50.49% in HDFC Ergo General Insurance Co.; ICICI Bank holds a 55.86% stake in ICICI Lombard General Insurance Co. Ltd; Kotak Mahindra Bank holds 100% in Kotak Mahindra General Insurance; and State Bank of India holds 57.13% in SBI General Insurance Co. Ltd.

“Banks are the major distributors of financial products especially life insurance. Any reduction of stake by sponsor banks in these institutions may have negative impact on the distribution capabilities as well as general public perception about these institutions they enjoy because of parentage. This issue may impact the prospective investor sentiment also,” said Ashutosh Mishra, head of research, Ashika Stock Broking.

In any insurance business, whenever capital infusion takes place, all promoters need to put in money as per the proportion of their shareholding. If even one of the promoters is unable to put in money as per their shareholding, the capital infusion process fails. This can stifle the growth of the insurer.


“RBI is concerned that such capital contributions commitments may hurt the bank and exposes it to higher risks. This is why RBI wants to cap bank’s holding in insurance firms,” said the first person.

The second person said RBI doesn’t want banks to own insurance, asset management and NBFC businesses.

“Over a period of time, RBI wants to reduce the holding cap to 30% or below 10%,” said the second person.

Insurance is a capital-guzzling business, which needs regular capital infusions as it grows. Mutual fund businesses also have been growing steadily but new norms related to penetration of AMCs into locations beyond top-15 cities, require additional growth capital.

The NBFC business has been shrinking after the IL&FS debacle last September and a subsequent liquidity crisis. Any turnaround in the NBFC business or even to keep the NBFC afloat, albeit with losses until the credit situation improves, will require a lot of capital.


In all these businesses, wherever banks are parent companies, capital outflow will be from the bank’s books, which will weaken the bank’s own core business.

While RBI plans to limit the holding of banks in insurance at 30%, in order to ensure that insurance companies do not face growth constraint due to the ceiling on bank’s holding, the Insurance Regulatory and Development Authority of India, or Irdai, last week proposed an increase in FDI in insurance from 49% to 74%. If this proposal is enacted in the Parliament, foreign joint venture partners in insurance will be able to infuse more capital in the company whenever growth plans are drafted.

To be sure, RBI has been attempting to recalibrate banks’ holding norms to safeguard them from external risks for some time. In May 2011, an RBI working group recommended a holding company structure for banks. It said all new banks and insurance companies will mandatorily need to operate under the financial holding company (FHC) framework and intermediate holding companies within the FHC should not be permitted.

Under the holdco norms, a bank had to unwind its shareholding in subsidiaries, and the existing shareholding of the bank in its units were to be transferred to the holdco.

According to the working group, the holdco was supposed to be regulated either by RBI itself or by a new regulator. The group had said it was necessary to put in place some limit on the expansion of non-banking businesses after the existing financial groups, dominated by banks, migrate to the holding company structure. However, the holdco proposal has now been scrapped due to its complexities, according to the three people cited above.


Source: Live Mint

Date: 27th December 2019

Growth in motor insurance business remains moderate

Overall growth in health premium was robust at 28% y-o-y, compared to YTD run-rate of 17%.

General Insurance companies reported 16% year-on-year (y-o-y) growth in premium in November 2019, up from 11% in October. Motor business continues to moderate on the back of weak OEM sales and moderating third-party (TP) business, while fire and health have helped offset the weakness. Large private players, ICICI Lombard (down 6% y-o-y, up 7% ex-crop) and Bajaj (up 8% y-o-y) and HDFC ERGO (down 30% y-o-y, up 8% ex-crop) posted weaker-than-industry numbers. Chola MS (up 14% y-o-y) was in line while SBI (up 40% y-o-y ex-crop) maintained robust performance.

Motor TP moderation continues

Motor segment reported 6% y-o-y premium growth in November 2019, moderating from the 15-20% growth seen in the last two months. The immediate reaction to new traffic penalties on motor TP premiums seems to have almost faded. Motor TP moderated sharply to 10% y-o-y (22% in October, 16% in YTD FY2020). OD business premiums were flat y-o-y in line with YTD run-rate after witnessing the first month of premium growth in October that was likely led by the festive season sales. Private sector continued to gain market share registering 11% y-o-y growth while PSUs reported a decline of 4% y-o-y.

Own-damage (OD) business was back to flat growth in November after registering 8% y-o-y growth in October 2019, reflecting weak OEM sales. Higher business in October was likely reflecting festive season sales. Among large private players, motor OD premium growth for Bajaj (15% y-o-y) and Chola MS (11% y-o-y) was better than the industry while ICICI Lombard posted 6% decline in premiums for the month-the reason for such a sharp decline for ICICI is unclear. Acko and Go Digit remained the fastest while SBI General maintained momentum at 60% y-o-y growth.

TP business moderated sharply to 10% y-o-y in November 2019 to levels well below YTD run rate of 16% y-o-y growth. Premiums had spiked in September (up 38% y-o-y) moderating to 22% in November. Private players posted 16% growth while growth for PSU players was muted (3% y-o-y). Go Digit (up 3X y-o-y) continued to witness robust traction. Among top private players, Bajaj (up 24% y-o-y), HDFC ERGO (up 27% y-o-y) and Chola MS (up 12% y-o-y) posted better-than-industry growth rates (10% y-o-y) while ICICI Lombard saw premiums declining 14% y-o-y in November 2019.

Rebound in health insurance

Overall growth in health premium was robust at 28% y-o-y, compared to YTD run-rate of 17%. Retail heath growth improved registering 18% y-o-y growth in November 2019 (12% y-o-y in YTD FY2020). This may be due to a better pricing environment.

Industry trends were similar, with standalone insurers gaining market share (retail health premiums up 30% y-o-y) compared to single-digit growth at both PSU and private general insurers. In group health, standalone insurers registered 80% y-o-y growth while growth at private general insurers moderated to 23% y-o-y (40% in 2020 YTD). PSUs continued to post declines.

Fire business robust

Premium growth in fire insurance was robust in November 2019 at 58% y-o-y, better than YTD 2020 run rate of 45% y-o-y. All major players delivered strong growth, except Bajaj at 10% y-o-y. GIC had increased reinsurance rates (average rise of 2X) in eight occupancies (comprising 35% of industry volumes) which will likely drive higher volumes and profitability in FY2020E. The run rate of 45% is higher, we would expect some moderation over the next few months.


Source : Financial Express

Date: 25-12-19

Marketers will prioritize mobile, web development talent in 2020

Most advertising and marketing managers (67%) plan to expand their teams in the first half of 2020, with a focus on mobile and web development positions, according to the Dec. 16 results of a Robert Half survey.

  • Even more (69%) said they’ll be increasing the number of freelancers they use — a 7-point jump from six months ago, according to the firm.
  • “To keep up with changes in technology and consumer behavior, businesses seek people with a passion and commitment to improving customer experiences and driving growth through digital innovation,” said Diane Domeyer, executive director of Robert Half’s The Creative Group, in a press release. “Companies are increasingly hiring professionals with expertise in areas such as data analytics, demand generation, automation and artificial intelligence.”

Dive Insight:

The demand for web and mobile professionals illustrates an evolution that’s taking place across industries. Employers of all types are increasingly focused on finding talent experienced in data, artificial intelligence and other emerging tech.

Marketers aren’t alone in their plans to hire freelancers, either. Fearing a recession, many employers have adopted “agile” talent strategies focused on temporary workers or independent contractors, retaining the ability to quickly and easily adjust headcount in response to market demands.

But despite these plans to increase headcount, employers know the talent market remains tight. A majority of the advertising and marketing managers responding to the Robert Half survey said they’ve had a hard time finding the right talent, and other research shows they’re not alone: HR professionals responding to an XpertHR survey said recruiting will remain a top concern heading into 2020.

In response, employers have devised some creative solutions. Some are prioritizing candidates with the right soft skills (such as leadership and strong communication), hoping they can be trained on the job’s more technical requirements. Others have turned to untapped talent pools, focusing on individuals with disabilities and those with criminal histories, for example. Still more have removed drug testing mandates and degree requirements, attempting to cast a wider net.

Improved benefits and development opportunities often are on the menu, too, but with the exception of retail employers hoping to attract seasonal workers, employers generally have been slow to offer substantial salary increases, again wary of a predicted recession.


Source: HR Dive

Date: 18th December, 2019

Toffee Insurance secures $5.5 m Series A funding

Toffee Insurance, a digital first insurtech startup, has secured series A funding of $ 5.5 million. This funding round was led by IVM Intersurer with Omidyar Network, Flourish Ventures, Accion Ventures Lab and Kalaari Capital.

This is Toffee Insurance’s second consecutive raise from four of the five key investors after their initial funding round of $1.5 million last year. Rohan Kumar, CEO & Co-Founder, Toffee Insurance said: “Our goal is to unbundle products and repackage them in a consumer-friendly way, focussing on the benefits of insurance to make it almost like a commoditised way to sell insurance rather than a financial product.”



Source: Business Line

Date: 18th December, 2019





Disruptive HR: How People Practices are Changing the Business Landscape

Technological breakthroughs, demographic shifts, data and analytics are shaping the workforce. To manage these changes effectively requires HR to disrupt itself and reinvent its services


Chandan Chattaraj

President–HR, India & Global, Uflex

For me, it comes back to a quote by musician Frank Zappa: “You can’t have progress unless you deviate.” In my career span of three decades, I have been witness to disruption many-a-times. It is only the speed and scale of disruptions that has gone up manifold in recent years and it will keep on increasing.

The present business scenario is turbulent and full of uncertainties. Technological breakthroughs, demographic shifts, data and analytics are shaping the workforce. To manage these changes effectively requires HR to disrupt itself and reinvent its services.

Some of the disruptive trends in HR that are revolutionising the world of business are:

HR Technology

We see lots of emerging trends with technology: Internet-of-Things, robotics, artificial intelligence, social media, and so forth.  With the advent of technology, HR has been continually disrupted and so has the business. HR technologies have created dramatic innovation in hiring, paying, training, and governing organizations. This will continue with robotics and artificial intelligence replacing many of the traditional human tasks.

Emphasis on HR Analytics

Without linking analytics to business results, the statistics do not tell the right story. By focusing on the business, the concept of HR analytics has been disrupted. The implementation of HR analytics has increased by leaps and bounds to enhance workflow and business operations. HR analytics is being applied to various processes including recruitment, retention, learning and development, and performance monitoring. Advanced tools and analytical models are also being used to monitor employee whereabouts, communication patterns and employee engagement, whose data is used to improve user experience and increase the rate of efficient employee work hours.

Developing Learning and Training Modules

The scope for corporate learning has matured with the inclusion of learning management systems into business processes. The growing market for e-learning and webinars has emphasized the need to strengthen employee skills by engaging them in active learning sessions. These courses are being developed based on individual employee competencies and are designed to perform logically to recommend suitable actions in training. E-learning is establishing itself to be the main support in coping with the changing business demands.

Advanced Recruitment Models

Over the years, innovative methods have been shaping the way recruitment and talent acquisition is processed. Vendors offering recruitment management and HRM modules are developing advanced models that cater to the end-to-end process of hiring; from finding the right candidates to on boarding and background verifications, all are taken care of through easily accessible user portals. These advanced tools and models filter the right skills based on consolidated candidate data that are linked to online job portals and websites. They analyse the business needs and strategize hiring plans accordingly; that implement various interviewing processes, candidate assessments, employer branding, pre-screening tests and employee referrals.

Disruption is never ending. HR function needs to continually disrupt itself in order to stay relevant. There has been a lot of negative read about HR like it’s time to blow HR’, ‘it’s time to do away with the HR department. Blow up and recreate yourself to sustain the credibility of the function. HR needs to be the centre of expertise consisting of team of professionals with deep technical expertise in specialist areas such as recruitment, reward and talent management. This would empower them to provide solutions to the organizational people challenges.

In a constantly changing world and a business environment marked by volatility, uncertainty, complexity and ambiguity; technology will continue to play a growing role in HR’s success. Already, it is helping HR to take a more holistic approach to simplifying workforce management; finding, developing and retaining the right talent; predicting workforce changes and issues; planning in alignment with company goals; and working strategically with senior executives.

The bottom line is that whether you are the leaders of your organisations or you are the HR practitioners; accept the fact that these disruptions are here to stay, it is important to become champions of this change within organisations, rather than followers.

Source: Entrepreneur.com

Date: 11th December 2019

TCS 1st Tata Group firm to offer health insurance benefits to LGBT employees

TCS 1st Tata Group firm to offer health insurance benefits to LGBT employees

IT services major Tata Consultancy Services (TCS), which employs over 4 lakh people across the world, has become one of the first Tata Group companies to announce changes in its health insurance policy in order to provide benefits to employees involved in a same-sex relationship. The change in health insurance policy would now benefit all lesbian, gay, bisexual and transgender or LGBT employees in the company.According to an email received by the company’s employees, the new health policy redefines ‘spouse’ as a partner, The Times of India reported. TCS’ new insurance policy will cover up to 50 per cent cost of sex or gender reassignment surgery, the report adds.

“Respect for the individual is one of our core TCS values, and built on this value, we continue our journey towards LGBTQ+ inclusion. We believe in building an organization where everyone feels included, involved and respected. We want to make the ecosystem fare and conducive for all,” TCS Global Diversity chief Preeti D’mello told the daily.

Notably, a handful of big companies, which includes Godrej Group, Accenture, IBM India, Citibank, Capgemini India and RBS India, already offer similar policies to members of the LGBT community.