"We requested the Reserve Bank not to make broking compulsory and continue with the current agency model," R K Dubey, chairman and managing director of Canara Bank, whose board had reportedly rejected the proposal, told reporters on the sidelines of an IBA function.
    
Asking banks to compulsorily act as insurance brokers and discontinue their banc assurance model also has some legal issues, he said, also questioning if the move will help achieve the aim of deepening insurance penetration.

The bankers will be meeting Financial Services Secretary

Rajiv Takru here on Wednesday to air their reservations, Dubey said, adding that he hopes for some amicable solution.
    
Other bankers who were present at the meeting (which also had representatives from insurance watchdog Irda) included Chanda Kochhar of ICICI Bank, KV Kamath of PNB and Shikha Sharma of Axis Bank.
    
Takru had last week said the government was asking banks to phase out banc assurance model gradually, not immediately.
    
After RBI issued a notification on November 29 last year allowing banks to enter insurance broking, the Finance Ministry asked banks to begin switching to the broking model and start phasing out the banc assurance model.
    
The Indian Banks Association last fortnight wrote to the Finance Ministry saying the management of each bank should be given the freedom to decide whether they would be competent enough to sell products of more than one insurer.
    
In the current Budget, Finance Minister P Chidambaram had said banks would be allowed to sell insurance products from multiple companies and not just one insurer (as is the present practice under the banc assurance model) to increase the penetration of insurance products.
    
Under banc assurance model a bank is allowed to become a corporate agent of one life and general insurance company each, while under the broking business, it will be able to sell products of multiple companies.
     
Takru had said banks have two options. "Either to follow the law as lay down by the Irda and the RBI or alternately you move out of the business."
     
Many state-run banks say the government proposal is not implementable.
     
The Finance Ministry directive would allow banks to sell products of multiple insurers. Most of them currently sell policies under the corporate agency arrangement that prohibits them from dealing in the products of more than one life insurer and one general insurer. Most banks also have their own insurance subsidiaries.

(Agencies)

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