The consortium led by Allahabad Bank for entering the non-life insurance business is likely to start with an initial capital base of Rs 200 crore instead of Rs 100 crore as stipulated by the Insurance Regulatory and Development Authority (IRDA).

Sources in the bank told PTI that doubling of the capital base would give a feeling of comfort since this is the first entry ever made by two public sector banks into the non-life insurance business in the country.

Besides Allahabad Bank, other members of the consortium are Indian Overseas Bank (IOB), private sector Karnataka Bank and Dabur.

Bank sources said that both Allahabad Bank and IOB would hold less than 50 per cent in the consortium, adding that this has been done to give a `private flavour' to the venture.

According to sources, the Indian partners would hold 74 per cent of the total equity base, while the foreign partner would provide the remaining 26 per cent in the venture.

As per IRDA norms, foreign partners are now restricted to hold only 26 per cent equity either in life or non-life insurance business.

Asked about the selection of the foreign partner, sources said that five overseas insurance companies have been short listed by the consortium.

Among these, one was Japan's leading insurance company, two were Australian, and one each from France and USA.

According to sources, the overseas partner would be selected within two days, for which hectic discussions were now on.

Once the foreign partner was selected, a company would then be formed following which IRDA would be approached for approval.

Asked why non-life insurance business was chosen for diversification, sources said that at present, no public sector bank or banks were in this line.

This area would throw up tremendous opportunity for growth for the bank as well as for others.

To a query, the sources said the bank does not have any plan to enter the life insurance business.

Meanwhile, Allahabad Bank has appointed TCS and IBM for implementing core-banking solution (CBS) at a cost of Rs 225 crore.

(www.business-standard.com)