A board-level committee will look afresh into the business model for the entry of Punjab National Bank (PNB) into the life insurance field.
Indicating this in an interaction with The Hindu here on Monday, Mohan V. Tanksale, Executive Director, said a decision to this effect was taken at the last meeting of the board.
The panel would look into all possibilities to gain an entry into the insurance field — whether the bank could function as a corporate agent or work as a multi-product distributor or be a product manufacturer. The panel had been given the brief to come out with a recommendation on the right business model for the bank's foray into the insurance field.
Mr. Tanksale was confident that the panel would come out with its recommendations in three months.
Though several large banks, including some overseas ones, have entered the Indian life insurance space, PNB has been a notable absentee. An exclusivity clause in its multi-way joint venture with Vijaya Bank, Principal and Berger Paints has constrained PNB from pursuing any kind of insurance activity, either underwriting or distribution. The problem had since been gotten over, Mr. Tanksale said.
PNB, he said, was hoping for a 40 per cent growth in fee-based income during the current financial year. At Rs. 3,565 crore, fee-based income constituted about 11-12 per cent of the bank's total income during 2009-10. Mr. Tanksale said PNB was keen to drive the fee-based income this year to 15 per cent.
The Executive Director was confident of achieving a 20-22 per cent credit growth this year. He admitted that banks in general had been selective and cautious in lending to commercial real estate business. He attributed this to the high risk weight assigned to commercial real estate loans. Auto (cars, in particular), retail home and education segments were doing well in terms of credit disbursal, he said. The auto loan portfolio of PNB is worth around Rs. 3,000 crore, the home segment Rs. 8,000 crore and education Rs. 2,000 crore.
Mr. Tanksale said the credit offtake was a bit slow for infrastructure projects. He, however, hastened to add that sanctions were indeed happening. In this context, he pointed to the usual lag time between sanctions and loan availing. With much of the debt closure having taken place already in the farm sector and following normal monsoon, he expected agriculture credit to pick up.
Mr. Tanksale did not agree with the view that fixing a base rate would make some borrowers to pay more. He said the move towards the base rate would force banks to focus on managing the cost of operations.
