Canara, OBC against HSBC’s plan to sell its insurance stake in JV

India Infoline News Service | Mumbai |

According to two Indian banks, HSBC is selling its stake without consulting them

State-owned Canara Bank and Oriental Bank of Commerce (OBC) — the domestic partners — in Canara HSBC OBC Life intend to oppose HSBC’s plan to sell stake in its Indian life insurance joint venture (JV), according to a media report.

According to two Indian banks, HSBC is selling its stake without consulting them. They were not happy that HSBC, which runs the operations of Canara HSBC OBC Life Insurance, approached prospective buyers without consulting them, even as the JV shareholding agreement contains ‘tag-along rights’, the report added.

The clause, which gives shareholders the right to be part of a sale deal if one decides to sell stake, was inserted in the shareholding agreement when the JV was formed. So, the prospective buyer will have to offer Canara Bank and OBC similar terms as it offers HSBC in the deal, the report further mentioned.

Canara HSBC OBC Life was launched in June 2008 and is a joint venture between Canara Bank (holding 51%), HSBC Insurance (Asia Pacific) Ltd (holding 26%), the Asian insurance arm of HSBC and Oriental Bank of Commerce (holding 23%).

The joint venture operates a bancassurance model and has a network of over 6,000 bank branches of its corporate agents. Bancassurance is an arrangement between banks and insurers to sell insurance products through banks.

Earlier, Canada-based life insurer Manulife and HDFC Life were said to mull for HSBC insurance stake. The company which buys HSBC's stake can sign a new bancassurance agreement with the two banks, in addition to the existing bancassurance arrangement. HSBC has been planning to exit the Indian business.
 

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