Taking a cue from the Punjab National Bank’s (PNB) model for entering the lucrative insurance market, two other public sector banks — Indian Overseas Bank (IOB) and Central Bank of India — are planning a similar move. Both IOB and Central Bank are at an initial stage of identifying the right model to start an insurance arm.

Through a bancassurance tie-up, these banks will offer their branch network as a low-cost distribution channel to existing insurance companies. In return, banks would seek a strategic stake holding. “Both IOB and Central Bank are trying to enter the insurance sector in India by partnering companies with experience in the field. With bancassurance turning out to be a very cost-efficient distribution model for insurers, there are many insurance companies which are interested in tapping banks.

These public sector banks may use the same model being followed by PNB, though with some changes in design as per the specific contract,” said the insurance company official. He added that among other PSBs planning a foray into insurance, Syndicate Bank has already issued a Request for Information to private insurers, while Indian Bank is currently selecting a consultant that would help it choose the right model for the insurance business. The insurance company official added that Central Bank, like PNB, would find it easy to leverage its large network of 3,650 plus branches, though a smaller bank like IOB may find it harder to attract large insurance companies.