Canara Bank, HSBC and Oriental Bank of Commerce have signed a memorandum of understanding to establish a new Life insurance company. Speaking on the occasion, Union finance minister, P Chidambaram said, “The three banks will bring in their special skills and will contribute to make this venture a success. I have no doubt that the venture will obtain regulatory approval shortly and will take off.” David L Fried, CEO, HSBC Insurance (Asia- Pacific) said: “Only Irda has to give its approval and the product will take off in 12 months time.”

As per the proposed agreement, the stakes of the three banks — Canara Bank, HSBC and OBC would be 51, 26 and 23 per cent respectively and the new life insurance company will have a capital of Rs 325 crore with HSBC contributing Rs 177 crore and Canara Bank and OBC contributing Rs 102 crore and Rs 46 crore respectively. “By collaborating with HSBC we shall be in a position to bring the best of international insurance products to the fast growing Indian markets,” M B N Rao, CMD, Canara Bank said.

Clive Bannister, global head insurance, HSBC, said,“We think there is enormous potential when we look at the gap between Indian and international penetration levels in the sector. We are confident of redesigning and modernising the industry.”

Chidambaram added, “The benefit of insurance is still unknown to millions of Indians with penetration at only 2.5 per cent and it’s the only product other than pension funds that mitigates risk and builds on savings.”