Indiabulls’ insurance foray may be delayed

RBI nod for IBHFL-LVB merger crucial

As the IBHFL-LVB merger was announced after the the R1 licence, insurance regulatory the insurance bid may be revisited of the merger announcement.

Indiabulls Group’s foray into the insurance sector is likely to get delayed as the insurance regulator is scrutinising the merger proposal of its housing finance arm and Lakshmi Vilas Bank (LVB) to understand its implications on the capital position of the group.

Indiabulls Life Insurance as well as Indiabulls General Insurance have received the R1 approval — which is the first stage, in-principle approval — from the IRDAI. However, since the LVB merger with Indiabulls Housing Finance was announced after the R1 licence, insurance regulatory sources said the entire proposal needs to be revisited in its wake.

Capital needs

“Insurance business needs capital. Now, the group’s housing finance arm will be entering banking; that will also need capital, given that LVB’s capital position is weak.

“We have to make sure that the group can generate sufficient capital for its insurance venture,” said a source.

The merger would solve LVB’s capital needs as its capital adequacy ratio would rise significantly, post the merger, due to the mortgage lender’s strong capital position.

Both the life and general insurance companies are subsidiaries of Indiabulls Integrated Services Ltd. (IISL) and the latter is not related to Indiabulls Housing Finance.

Indiabulls Life Insurance had already applied for R2 licence, while the general insurance company is planning to apply for the same shortly.

IISL had infused ₹200 crore after the life insurance arm received R1 approval, taking the total infusion to ₹310 crore, which is much higher than the minimum requirement.

“IRDAI will wait for Reserve Bank of India’s approval for the merger proposal of Indiabulls Housing Finance Ltd. (IBHFL) and LVB before granting the final licence, to see what the conditions attached along with the approval are,” the source added.

IBHFL had received the approval from the Competition Commission of India for the proposed merger, while it awaits other regulatory approvals.

Industry sources said since Indiabulls Housing Finance is planning to become a bank, it augers well for the group’s insurance venture since there is a bankassurance tie up with the lender.

In April, LVB and Indiabulls Housing Finance (IBHF) boards had approved the merger of the two entities. While LVB will get capital due to the merger, Indiabulls Housing will get access to low cost funds. The mortgage lender had applied for a universal banking licence when the process was initiated bythe RBI last time, but was unsuccessful.