Kotak Mahindra Bank’s general insurance venture gets RBI nod1 min read . Updated: 25 Nov 2014, 06:32 PM IST
The bank will now apply to complete the registration of the new company with Irda
Mumbai: Private sector bank Kotak Mahindra Bank Ltd on Tuesday said it has received Reserve Bank of India (RBI) approval to start its general insurance business through a new subsidiary.
The RBI approval follows the in-principle approval the bank has already received from the Insurance Regulatory and Development Authority (Irda).
Kotak will now apply to complete the registration of the new company with Irda, the bank said in a press release.
Mahesh Balasubramanian, currently executive vice-president and co-head of branch banking at Kotak Mahindra Bank, will take over as chief executive officer (CEO) of the new venture.
Kotak already has a life insurance company called Kotak Mahindra Old Mutual Life Insurance Ltd, in association with South Africa-based Old Mutual Public Ltd Co.
Last week, Kotak Mahindra Bank announced that it will acquire ING Vysya Bank Ltd in a $2.5 billion all-share deal, which is the largest banking acquisition and the first such deal in India in four years.
In a note earlier on Tuesday, rating agency Standard and Poor’s Ratings Services (S&P) said Kotak’s credit profile will “improve marginally" because of the bank’s increased size and reach after the acquisition.
“The acquisition is likely to improve Kotak Mahindra Bank’s growth potential and bring about revenue synergies and cost efficiencies. Nevertheless, we anticipate a slight deterioration in the bank’s capitalization following the deal. We assess Kotak Mahindra Bank’s stand-alone credit profile as ‘bbb-’," S&P said in the note.
S&P said the merged entity faced integration issues around human resources, technology and alignment of credit policies and processes. “Nevertheless, we believe that the Kotak Mahindra Bank management will be able to manage the integration challenges. We expect the capitalization of the combined entity to remain strong post the merger, despite ING Vysya’s relatively weaker capitalization," S&P credit analyst Amit Pandey was quoted as saying in the note.
“We expect the merged entity’s risk position to remain adequate for the next 12-24 months. The key risks to asset quality will continue to be from Kotak Mahindra Bank’s commercial real estate business. The stable outlook reflects our expectation that Kotak Mahindra Bank will maintain its financial profile over the next 12-24 months, despite some deterioration in its capitalization," S&P said.